Shengjing Bank : 2020 INTERIM REPORT

September 17, 2020 at 10:05 am EDT

Shengjing Bank Co., Ltd.*

(A joint stock company incorporated in the People's Republic of China with limited liability)

Stock Code: 02066

2020

Interim Report

CONTENTS

1	Company Information	2
2	Financial Highlights	4
3	Chairman's Statement	8
4	Management Discussion and Analysis	10
	4.1	Analysis of Overall Operations	10
	4.2	Analysis of Financial Statements	12
	4.3	Business Overview	50
	4.4	Risk Management	62
	4.5	Future Prospects and Development Strategy	73
5	Change in Share Capital and Shareholders	74
6	Directors, Supervisors, Senior Management and Employees	85
7	Significant Events	90
8	Review Report of the Independent Auditors	93
9	Interim Financial Statement	95
10	Notes to the Interim Financial Statement	106
11	Definition	235

Shengjing Bank Co., Ltd. is not an authorised institution within the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong), not subject to the supervision of the Hong Kong Monetary Authority, and not authorised to carry on banking and/or deposit-taking business in Hong Kong.

COMPANY INFORMATION

Legal Name in Chinese	盛京銀行股份有限公司
Abbreviation in Chinese	盛京銀行
Legal Name in English	Shengjing Bank Co., Ltd.
Abbreviation in English	SHENGJING BANK
Legal Representative	QIU Huofa
Authorised Representatives	QIU Huofa and ZHOU Zhi
Secretary to the Board of Directors	ZHOU Zhi
Joint Company Secretaries	ZHOU Zhi and KWONG Yin Ping, Yvonne
Registered and Business Address	No. 109 Beizhan Road, Shenhe District, Shenyang, Liaoning
	Province, the PRC
Contact Number	86-24-22535633
Website	www.shengjingbank.com.cn
Principal Place of Business in Hong	Unit 4105, 41/F, Office Tower, Convention Plaza, 1 Harbour
Kong	Road, Wanchai, Hong Kong
Website of the Hong Kong Stock	www.hkexnews.hk
Exchange on which the H Share
Interim Report is Published
Place of Maintenance of the Interim	Office of the Board of Directors and Supervisory Board of
Report	Shengjing Bank
Stock Name	Shengjing Bank
Stock Code	02066

2 Shengjing Bank Co., Ltd.

COMPANY INFORMATION (CONTINUED)

H Share Registrar and its Business	Computershare Hong Kong Investor Services Limited
Address	Shops 1712-1716, 17th Floor, Hopewell Centre
	183 Queen's Road East, Wanchai, Hong Kong
Legal Advisor as to PRC Laws and its	Tian Yuan Law Firm
Business Address	10/F, China Pacific Insurance Plaza
	28 Fengsheng Hutong
	Xicheng District
	Beijing, the PRC

Legal Advisor as to Hong Kong Law and Freshfields Bruckhaus Deringer

its Business Address55th Floor, One Island East Taikoo Place, Quarry Bay Hong Kong

Auditor and its Business Address	KPMG
	8th Floor
	Prince's Building
	10 Chater Road
	Hong Kong

Interim Report 2020

FINANCIAL HIGHLIGHTS

(Expressed in thousands of Renminbi,		January to		January to	Rate of
unless otherwise stated)		June 2020		June 2019	Change
							（%）
Operating Results
Interest income	20,838,858	22,290,578	(6.5)
Interest expenses	(13,355,516)	(15,418,393)	(13.4)
Net interest income	7,483,342	6,872,185	8.9
Net non-interest income	2,355,390	3,265,397	(27.9)
Operating income	9,838,732	10,137,582	(2.9)
Operating expenses	(2,212,683)	(2,011,047)	10.0
Impairment losses on assets	(4,372,912)	(4,596,742)	(4.9)
Profit before taxation	3,253,137	3,529,793	(7.8)
Income tax expenses	(407,400)	(385,602)	5.7
Net profit	2,845,737	3,144,191	(9.5)
Net profit attributable to equity shareholders of the
Bank	2,829,393	3,156,059	(10.4)
Calculated on a per share basis (RMB)
						Change
Basic and diluted earnings per share	0.32	0.54	(0.22)

4 Shengjing Bank Co., Ltd.

FINANCIAL HIGHLIGHTS (CONTINUED)

(Expressed in thousands of Renminbi,				31 December	Rate of
unless otherwise stated)	30 June 2020	2019	Change
						(%)
Major indicators of assets/liabilities
Total assets	1,058,389,284	1,021,480,796	3.6
Of which: total loans and advances to customers (1)	512,774,537	457,202,375	12.2
Total liabilities	977,369,802	942,358,811	3.7
Of which: total deposits from customers (1)	641,706,772	641,428,191	0.0
Share capital	8,796,680	8,796,680	-
Equity attributable to equity shareholders of the Bank	80,436,685	78,555,532	2.4
Total equity	81,019,482	79,121,985	2.4

		January to		January to
		June 2020		June 2019	Change
Profitability Indicators (%)
Return on average total assets (2)	0.55		0.62	(0.07)
Return on average equity (3)	7.11		10.86	(3.75)
Net interest spread (4)	1.69		1.63	0.06
Net interest margin (5)	1.73		1.53	0.20
Cost-to-income ratio (6)	21.41		19.06	2.35

Interim Report 2020

FINANCIAL HIGHLIGHTS (CONTINUED)

				31 December
	30 June 2020	2019	Change
Asset quality indicators (%)
Non-performing loan ratio (7)	2.49		1.75	0.74
Provision coverage ratio (8)	130.07		160.90	(30.83)
Allowance to total loans (9)	3.24		2.82	0.42


				31 December
	30 June 2020	2019	Change
Capital adequacy ratio indicators (%)
Core Tier-one capital adequacy ratio (10)	11.52		11.48	0.04
Tier-one capital adequacy ratio (10)	11.52		11.48	0.04
Capital adequacy ratio (10)	14.37		14.54	(0.17)
Total equity to total assets ratio	7.65		7.75	(0.10)
Other indicators (%)


Loan-to-deposit ratio (11)	79.91		71.28	8.63

6 Shengjing Bank Co., Ltd.

FINANCIAL HIGHLIGHTS (CONTINUED)

Notes:

Total loans and advances to customers do not include interest receivable, and total deposits from customers do not include interest payable.
Representing the net profit during the period as a percentage of the average balance of total assets at the beginning and the end of the period.
Representing the net profit during the period as a percentage of the average balance of total equity at the beginning and the end of the period.
Calculated by deducting the average interest rate of interest-bearing liabilities from the average return rate of interest-earning assets.
Calculated by dividing net interest income by the average interest-earning assets.
Calculated by dividing operating expenses (less tax and surcharges) by operating income.
Calculated by dividing the balance of non-performing loans by the total amount of loans and advances to customers.
Calculated by dividing the balance of provision for impairment on loans by the non-performing loans.
Calculated by dividing the balance of provision for impairment on loans by the total amount of loans and advances to customers.
Core Tier-one Capital adequacy ratio, Tier-one capital adequacy ratio and capital adequacy ratio were calculated in accordance with the latest guidance promulgated by the CBIRC (effective from 1 January 2013).
Loan-to-depositratio is calculated by dividing the total amount of loans and advances to customers by total deposits from customers.

Interim Report 2020

CHAIRMAN'S STATEMENT

In the first half of 2020, in the face of complex and severe business environment, Shengjing Bank strengthen the business philosophy of "taking deposits, law compliance, talents and science and technology as the key foundations of the Bank", and clearly defined the market positioning of "serving the local economy, small and micro businesses, as well as urban and rural residents". Further we steadily promoted the development of various businesses with the spirit of striding forward in spite of difficulties and seizing every minutes, and created a good situation in the operation of the entire Bank where businesses developed soundly with steady progress, and thus laid a solid foundation for the realization of our annual business objectives. As of 30 June 2020, the total asset of Shengjing Bank amounted to RMB1,058,389 million, the total amount of loans and advances to customers amounted to RMB512,775 million, the total amount of deposits amounted to RMB641,707 million, the operating income amounted to RMB9,839 million and the net profit amounted to RMB2,846 million.

Gradually deepen the reform of the system and mechanism, and continuously enhance the

inner driving force for development. The Bank made efforts to strengthen the top-level design of corporate governance, improve the governance structure, and clearly define the responsibility boundaries of the "two sessions and one level". We also optimized the organizational structure of the head office, specified in detail the management and operation functions of the business departments of the head office, and clarified the relationship among the front, middle and back office. Guided by the development strategy of the whole Bank and adhering to the principle of combining promotion of efficiency with giving consideration to fairness, the Bank further improved the performance appraisal system and established a scientific and efficient assessment mechanism with clear rules for rewards and penalties, fully stimulated the enthusiasm, initiative and creativity of all staff members, and thus unified all employees of the Bank into the community of interest to promote the development of Shengjing Bank.

Committed to the basic policy of "Taking Deposits as the Key Foundation of the Bank" and

enhance the basis for deposits development. Adhering to the customer position of "Two Advantages and Two Main Issues', effectively carrying out a market-oriented business model driven by marketing and products, whereby the public-private interaction and online-and-offline interactions were established. The Bank increased the effort for the allocation of marketing personnel in the main area of the front line, effectively improved the executive power of marketing staff, enabled various branches to give full play of their roles as the main force, and formed a marketing "Iron Army" that can fight hard battles, so as to promote the steady growth of various businesses.

8 Shengjing Bank Co., Ltd.

CHAIRMAN'S STATEMENT (CONTINUED)

Strengthen the construction of risk management system and strictly adhere to the basic principle

for sound operation. The Bank comprehensively promoted the reform of risk management lines, reshaped the risk management system, and made the risk management more refined and specialized. The Bank implemented the system of appointing risk directors, implemented vertical management of risk lines, and effectively resolved the existing business risks as well as prevented and controlled new business risks. The Bank continued to strengthen the construction of compliance culture, established a compliance culture of "Glorious for Compliance and Shameful for Violation Compliance and Shameful Violation", punished illegal and breaching activities, and as a result, the risk management was conducted in a more initiative, systematic and comprehensive way..

Carry out the "Three Major Constructions" in an in-depth way, and enhance the executive power of the whole Bank. On the basis of improved organizational structure and clearly defined responsibility in the whole Bank, the Bank put effort on solving the main issues and key problems, carried out the "Three Major Constructions" (namely the construction of system, team and culture) in an in-depth way, started to analyze and adjust the system, and comprehensively improved the effectiveness of the system. The Bank strengthened the team construction of three-levels, namely at the level of the head office, the branches and sub-branches through introduction from outside and internal cohesion, so as to build up a strong executive staff team. The Bank also vigorously promoted "positive energy" and actively cultivate a corporate culture embodied with hard working, ambition, dedication, health and sunshine.

As a poem says, "Believing in a life of two hundred years, one would fight against the water of three thousand miles". In the second half of 2020, in the face of difficulties and obstacles, Shengjing Bank will continue to focus on the strategic goal of "Being A Good Bank", continue to accumulate momentum and continue to identify changes and adapt to them, so as to comprehensively complete various tasks and achieve sound and rapid development!

Chairman of Shengjing Bank

QIU Huofa

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

4.1 ANALYSIS OF OVERALL OPERATIONS

In the first half of 2020, facing severe external economic environment, Shengjing Bank, focusing on the goal of "Being A Good Bank", made effort to change concept, increase deposits, control risks, strengthen implementation and handle the operation development and the COVID-19 pandemic prevention and control work in a unified manner, resulting in stable progress in business development.

Business scale continued to expand

In the first half of the year, focusing on laying a solid foundation for development and optimizing the business structure, the Bank steadily increased the scale of assets, maintained stable deposits and total loans. As of 30 June 2020, total assets of the Bank amounted to RMB1,058,389 million, representing an increase of RMB36,908 million or 3.6% as compared with that at the end of last year , reaching a historical high; total loans and advances to customers amounted to RMB512,775 million, representing an increase of 55,572 million or 12.2% as compared with that at the end of last year; total liabilities amounted to RMB977,370 million, representing an increase of RMB 35,011 million or 3.7% as compared with that at the end of the last year; balances of various deposits amounted to RMB641,707 million, representing an increase of RMB279 million as compared with that at the end of the last year.

The overall profit level is stable

In the beginning of this year, the downtown pressure on the economy has increased further affected by the unexpected COVID-19 pandemic outbreak. The Bank actively responded to the call of national policies, strengthened the support of the real economy, optimized the structure of assets and liabilities, strengthened pricing management, and reasonably reduced the cost of debt capital under the market environment of falling return rates of assets. The net interest margin and net interest rate of return increased by 0.06 percentage point and 0.20 percentage point respectively on a year-on-year basis, driving the growth of net interest income; meanwhile, affected by the fluctuation of bond market yield, the non interest income such as trading spread income of bills and bonds decreased as compared to the same period last year. In the first half of 2020, the operating income of the Bank was RMB9,839 million, representing a year-on-year decrease of RMB299 million, and the net profit was RMB 2,846 million, representing a year-on-year decrease of RMB 298 million.

10 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

(III) Continuously consolidate asset quality

The Bank continued to promote the reconstruction of the comprehensive risk management system, strictly controlled the incremental risk, actively resolved the stock risk, and improved the risk compensation ability. In the first half of 2020, the Bank implemented a more stringent and prudent risk classification standard according to the regulatory policy, and included all loans overdue for more than 90 days into the non-performing loans. As of June 30, 2020, the non-performing loan ratio of the bank was 2.49%, representing an increase of 0.74 percentage point as compared to the beginning of the year; loans overdue for more than 90 days accounted for 2.45% of all loans, representing a decrease of 1.44 percentage points as compared to the beginning of the year, effectively reducing the potential non-performing risk; the loan provision ratio was 3.24%, increased by 0.42 percentage point as compared to the beginning of the year, and the quality of credit assets remained stable.

(IV) Capital level continues to meet the standard

The Bank actively broadened capital replenishment channels, While exploring new capital replenishment tools, we strengthened replenishment by internally sourced capital and reasonably controlled risk-weighted asset growth rate, so as to ensure our capital adequacy ratio continuously met regulatory standards, and the implementation of the Bank's development strategic plan was effectively supported. As of 30 June 2020, the core tier-one capital adequacy ratio and tier-one capital adequacy ratio were 11.52% respectively, and the capital adequacy ratio was 14.37%.

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2 ANALYSIS OF FINANCIAL STATEMENTS

4.2.1 Analysis of the Income Statement

In the first half of 2020, the Bank achieved a profit before taxation of RMB3,253 million, representing a year-on-year decrease of RMB277 million or 7.8%, and achieved a net profit of RMB2,846 million, representing a year-on-year decrease of RMB298 million or 9.5%.

(Expressed in thousands of		For the six months ended 30 June
Renminbi, unless otherwise						Change in	Rate of
stated)	2020		2019	amount	change
									(%)

Interest income	20,838,858		22,290,578	(1,451,720)		(6.5)
Interest expense	(13,355,516)	(15,418,393)	2,062,877		(13.4)
Net interest income	7,483,342		6,872,185	611,157		8.9
Net fee and commission
income	580,900		611,246		(30,346)		(5.0)
Net trading gains	2,935,347		1,302,617		1,632,730			125.3
Net gains arising from
investments	2,335,148		2,933,500		(598,352)		(20.4)
Net foreign exchange losses	(3,638,101)	(1,589,387)	(2,048,714)		128.9
Other operating income	142,096		7,421		134,675			1,814.8
Operating income	9,838,732		10,137,582		(298,850)		(2.9)
Operating expenses	(2,212,683)	(2,011,047)	(201,636)		10.0
Impairment losses on assets	(4,372,912)	(4,596,742)	223,830			(4.9)
Profit before taxation		3,253,137		3,529,793		(276,656)		(7.8)

Income tax expense		(407,400)	(385,602)	(21,798)		5.7

Net profit		2,845,737		3,144,191	(298,454)		(9.5)

12 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.1.1 Operating income

In the first half of 2020, the Bank achieved an operating income of RMB9,839 million, representing a year-on-year decrease of RMB299 million or 2.9%, of which, net interest income accounted for 76.1% of the operating income, representing a year-on-year increase of 8.3 percentage points.

		For the six months ended 30 June
(Expressed in thousands of						Change in	Rate of
Renminbi, unless otherwise	2020	2019	amount	change
stated)								(%)
Net interest income	7,483,342	6,872,185	611,157		8.9
Net non-interest income	2,355,390	3,265,397	(910,007)		(27.9)

Operating income	9,838,732	10,137,582	(298,850)		(2.9)

4.2.1.2 Net interest income

In the first half of 2020, the Bank achieved a net interest income of RMB7,483 million, representing a year-on-year increase of RMB611 million, or 8.9%, mainly due to the year-on-year decrease in interest income by RMB1,452 million and year-on-year decrease in interest expense of the Bank by RMB2,063 million. The following table sets forth the interest income, interest expense and net interest income of the Bank during the period indicated:

			For the six months ended 30 June
(Expressed in thousands of							Change in	Rate of
Renminbi, unless otherwise	2020		2019	amount	change
stated)									(%)
Interest income	20,838,858		22,290,578	(1,451,720)		(6.5)
Interest expense	(13,355,516)	(15,418,393)	2,062,877		(13.4)

Net interest income	7,483,342		6,872,185	611,157		8.9

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.1.3 Net interest spread and net interest margin

In the first half of 2020, under the background of China's increasing financial support to the real economy, promoting the market-oriented reform of LPR interest rate and guiding the downward trend of loan interest rate, the Bank actively implemented economic and financial policies, continuously optimized the structure of assets and liabilities, strengthened pricing management, effectively controlled the cost of liabilities, significantly increased the average balance and proportion of loans and advances to customers during the reporting period, and paid interest on liabilities. The net interest spread and net interest margin increased slightly on a year-on-year basis. In the first half of 2020, the Bank's net interest spread was 1.69%, representing a year-on-year increase of 0.06 percentage point; the net interest margin was 1.73%, representing a year-on-year increase of 0.20 percentage point.

The following table sets forth the average balances of interest-earning assets and interest-bearing liabilities, the related interest income or expense, and the related average yields on interest-earning assets or the related average costs of interest-bearing liabilities for the periods indicated. The average balances of interest-earning assets and interest-bearing liabilities for the six months ended 30 June 2020 and 2019 are the average balances derived from the Bank's management accounts which have not been audited:

		For the six months ended 30 June 2020		For the six months ended 30 June 2019
(Expressed in thousands of			Interest	Average			Interest	Average
Renminbi, unless otherwise	Average		income/	yield/interest	Average	income/	yield/interest
stated)	balance		expense	payment	balance	expense	payment
						(%)				(%)
Interest-earning assets
Loans and
advances to customers	470,267,230	14,017,289	5.99	416,931,765	12,843,661	6.16
Financial investments	311,775,429	6,185,745	3.99			365,561,944	8,299,921	4.54
Deposits with Central Bank	68,777,185	510,047		1.49			76,076,002	553,480	1.46
Deposits and Placements with
banks and other financial
institutions	5,881,152	52,074	1.78	29,210,075	506,477	3.47
Financial assets held under
resale agreements	11,217,262	73,703	1.32	7,997,171	87,039	2.18

Total interest-earning assets	867,918,258	20,838,858	4.83	895,776,957	22,290,578	4.98

14 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

		For the six months ended 30 June 2020		For the six months ended 30 June 2019
(Expressed in thousands of			Interest	Average			Interest	Average
Renminbi, unless otherwise	Average	income/	yield/interest	Average	income/	yield/interest
stated)	balance	expense	payment	balance	expense	payment
							(%)			(%)
Interest-bearing liabilities
Borrowings from Central Bank	6,983,285	110,552	3.18	16,053,646	257,465	3.21
Deposits from customers	571,799,489	8,513,790	2.99	558,961,013	8,554,175	3.06
Deposits and Placements from
banks and other financial
institutions	109,672,852	2,108,076	3.87	146,969,802	2,797,185	3.81
Financial assets sold under
repurchase agreements	87,637,093	1,075,447	2.47	34,648,616	433,805	2.50
Debt securities issued	80,150,480	1,547,651	3.88	164,430,998	3,375,763	4.11

Total interest-bearing
liabilities	856,243,199	13,355,516	3.14	921,064,075	15,418,393	3.35


Net interest income			7,483,342					6,872,185
Net interest spread(1)						1.69			1.63
Net interest margin(2)						1.73			1.53

Notes: (1) Calculated as the difference between the average yield on total interest-earning assets and the average cost on total interest-bearing liabilities.

Calculated by dividing net interest income by average balance of total interest-earning assets on annualised basis.

The following table sets forth the changes in the Bank's interest income and interest expense due to changes in volume and rates for the periods indicated. Volume and rate variances have been measured based on movements in average balances over these periods, and changes in interest rates have been measured based on daily average interest-earning assets and interest-bearing liabilities. Variances caused by changes in both volume and interest rate have been allocated to changes in interest rate.

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

		For the six months ended
		30 June 2020 compared with 2019
		Increase/
(Expressed in thousands of Renminbi,		(decrease)	Due to	Net increase/
unless otherwise stated)		Volume (1)	Rate (2)	(decrease) (3)
Interest-earning assets
Loans and advances to customers	1,643,009		(469,381)	1,173,628
Financial investments	(1,221,199)	(892,977)	(2,114,176)
Deposits with Central Bank	(53,101)	9,668	(43,433)
Deposits and Placements with banks
and other financial institutions	(404,503)	(49,900)	(454,403)
Financial assets held under resale
agreements	35,047		(48,383)	(13,336)

Changes in interest income	(747)	(1,450,973)	(1,451,720)
Interest-bearing liabilities


Borrowings from Central Bank	(145,469)	(1,444)	(146,913)
Deposits from customers	196,476		(236,861)	(40,385)
Deposits and Placements from banks
and other financial institutions	(709,850)	20,741	(689,109)
Financial assets sold under
repurchase agreements	663,422	(21,780)	641,642
Debt securities issued		(1,730,276)	(97,836)	(1,828,112)

Changes in interest income expense		(1,725,697)	(337,180)	(2,062,877)


Changes in net interest income	1,724,950		(1,113,793)	611,157

Notes: (1) Represents the average balance for the period minus the average balance for the previous period, multiplied by the average yield or cost for the previous period.

Represents the average yield or cost for the period minus the average yield or cost for the previous period, multiplied by the average balance for the period.
Represents interest income or expense for the period minus interest income or expense for the previous period.

16 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.1.4 Interest income

In the first half of 2020, the Bank achieved an interest income of RMB20,839 million, representing a year-on-year decrease of RMB1,452 million or 6.5%, mainly due to the Bank's optimization of asset structure, in accordance with the guidance of regulatory policies, significant decrease of the average amount of inter-bank financial investment, and the decline of the rate of yield from financial investment due to the downward impact of overall market interest rates.

The following table sets forth the breakdown of the interest income of the Bank for the periods indicated:

		For the six months ended 30 June
	2020					2019
(Expressed in thousands of
Renminbi, unless otherwise stated)		Amount	% of total	Amount	% of total
Loans and advances to customers
Corporate loans (including
discounted bills)	12,048,231		57.8	11,951,212		53.6
Personal loans	1,969,058		9.4	892,449		4.0

Sub-total		14,017,289			67.2	12,843,661		57.6

Financial investments		6,185,745			29.8	8,299,921		37.2
Deposits with Central Bank	510,047			2.4	553,480		2.5
Deposits and Placements with banks
and other financial institutions	52,074			0.2	506,477		2.3
Financial assets held under resale
agreements	73,703			0.4	87,039		0.4

Total	20,838,858	100.0 22,290,578	100.0

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

1. Interest Income from Loans and Advances to Customers

Interest income from loans and advances to customers was the essential component of the Bank's interest income. In the first half of 2020, interest income of the Bank from loans and advances to customers amounted to RMB14,017 million representing a year-on-year increase of RMB1,174 million or 9.1%, and accounted for 67.2% of the total interest income, representing an increase of 9.6 percentage points, which was mainly due to the Bank continued to improve its business management system, promoted the transformation of operating structure, strengthened customer base, enriched product categories, and continued to increase the credit allocation . As a result, the scale and pricing of personal loans have increased significantly, which has driven the steady growth of interest income from loans and advances to customers.

The following table sets forth the average balances of the loans and advances to customers and the average earnings rate of the Bank's related interest income and loans and advances to customers during the period indicated:

					For the six months ended 30 June
			2020								2019
(Expressed in thousands of
	Average			Interest	Average		Average	Interest	Average
Renminbi, unless otherwise stated)		balance			income	yield		balance	income	yield
								(%)				(%)
Corporate loans
(including discounted bills)	404,422,330	12,048,231		5.99		383,619,826		11,951,212		6.23
Personal loans	65,844,900	1,969,058			6.01		33,311,939		892,449		5.36

Total	470,267,230	14,017,289		5.99		416,931,765		12,843,661		6.16

18 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Interest Income from Financial Investments
In the first half of 2020, interest income of the Bank from financial investments amounted to RMB6,186 million, representing a year-on-year decrease of RMB2,114 million or 25.5%, which was mainly due to the Bank's optimization of asset structure under the guidance of regulatory policies, and significant decline of financial investment scale year-on-year. At the same time, with the relatively adequate liquidity in the first half of 2020, the market interest rate level decreased significantly, and the rate of return of financial investment decreased.
Interest Income from Deposits with Central Bank
In the first half of 2020, interest income of the Bank from deposits with central bank amounted to RMB510 million, representing a year-on-year decrease of RMB43 million or 7.8%, which was mainly due to the slight decline in the average balance of the deposits with central bank.
Interest Income from Deposits and Placements with Banks and Other Financial Institutions
In the first half of 2020, interest income of the Bank from deposits and placements with banks and other financial institutions amounted to RMB52 million, representing a year-on-year decrease of RMB454 million or 89.7%, which was mainly due to the significant decrease in the average balance of deposits and placements with bank and other financial institutions as a result of the Bank's improvement in asset allocation.
Interest Income from Financial Assets Held under Resale Agreements
In the first half of 2020, interest income of the Bank from financial assets held under resale agreements amounted to RMB74 million, representing a year-on-year decrease of RMB13 million or 15.3%, which was mainly due to the influence of abundant market funds, the downward trend of money market yield and the decrease of average yield of financial assets held under resale agreements.

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.1.5 Interest expense

In the first half of 2020, interest expense of the Bank amounted to RMB13,356 million, representing a year-on-year decrease of RMB2,063 million or 13.4%, which was mainly due to the Bank's commitment to the basic policy of "Taking Deposits as the Key Foundation of the Bank", optimization of interest-bearing liabilities structure, the decrease of the overall scale of interest-bearing liabilities, reasonable control of the capital cost and decrease in the average cost of interest-bearing liabilities. The following table sets forth the principal components of the interest expense of the Bank for the periods indicated:

(Expressed in thousands of		For the six months ended 30 June
	2020			2019
Renminbi, unless otherwise
stated)		Amount	% of total	Amount	% of total
Borrowings from Central
Bank	110,552			0.8	257,465		1.7
Deposits from customers	8,513,790		63.7	8,554,175		55.5
Deposits and Placements
from banks and other
financial institutions	2,108,076			15.8		2,797,185		18.1
Financial assets sold under
repurchase agreements	1,075,447			8.1		433,805			2.8
Debt securities issued	1,547,651			11.6		3,375,763			21.9

Total	13,355,516			100.0		15,418,393		100.0

20 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

1. Interest Expense on Deposits from customers

In the first half of 2020, interest expense on deposits from customers amounted to RMB8,514 million, representing a year-on-year decrease of RMB40 million, or 0.5%, which was mainly due to the Bank's strengthening customer base maintenance and development, intensifying cost control, steady growth of average balance of deposits received, and year-on-year decrease of average deposit cost.

The following table sets forth the average balance, interest expense and average cost for each of the components of the Bank's deposits from customers:

(Expressed in thousands of		For the six months ended 30 June 2020				For the six months ended 30 June 2019
Renminbi, unless otherwise		Average		Interest		Average		Average	Interest		Average
stated)		balance		expense		cost		balance	expense		cost
					(%)					(%)
Corporate deposits
Demand	133,635,814	644,587	0.97	165,827,994	786,719	0.95
Time	197,496,005	3,408,493	3.47	218,190,409	4,322,071	3.96

Sub-total	331,131,819	4,053,080	2.46	384,018,403	5,108,790	2.66
Personal deposits
Demand	24,120,844	47,698	0.40	17,055,093	34,281	0.40
Time	216,546,826	4,413,012	4.10	157,887,517	3,411,104	4.32

Sub-total	240,667,670		4,460,710		3.73		174,942,610	3,445,385	3.94
Total deposits from customers	571,799,489	8,513,790	2.99	558,961,013	8,554,175	3.06

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Interest Expense on Deposits and Placements from Banks and Other Financial Institutions
In the first half of 2020, interest expense of the Bank on deposits and placements from banks and other financial institutions amounted to RMB2,108 million, representing a year-on-year decrease of RMB689 million or 24.6%, which was mainly due to the Bank's optimization the structure of liabilities and reducing the scale of interbank financing, which resulted in the decrease in the average balance of the deposits and placements with banks and other financial institutions.
Interest Expense on Financial Assets Sold under Repurchase Agreements
In the first half of 2020, interest expense of the Bank on financial assets sold under repurchase agreements amounted to RMB1,075 million, representing a year-on-year increase of RMB642 million or 147.9%, which was mainly due to the significant Bank's year-on-year increase in the average balance of the Bank's financial assets sold under repurchased agreement.
Interest Expense on Debt Securities Issued
In the first half of 2020, interest expense of the Bank on debt securities issued amounted to RMB1,548 million, representing a year-on-year decrease of RMB1,828 million or 54.2%, which was mainly due to the Bank's significant decrease in the average balance of the bonds issued.

4.2.1.6 Net Non-interest Income

In the first half of 2020, the Bank achieved the net non-interest income of RMB2,355 million, representing a year-on-year decrease of RMB910 million or 27.9%, mainly due to that with the impact of market environment, the trading profit of bond investment of the Bank decreased year on year. At the same time, due to the impact of the COVID-19 pandemic, the fluctuation of global financial market increased, and the fair value changes of derivative financial instruments held by the Bank increased at the end of the period.

22 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

1. Net Fee and Commission Income

In the first half of 2020, the Bank achieved a net fee and commission income of RMB581 million, representing a year-on-year decrease of RMB30 million or 5.0%, mainly due to the increase in fees and commission expenses, and the significant decrease in fee income of the trade settlement business resulting from the COVID-19 pandemic.

	For the six months ended 30 June
(Expressed in thousands of Renminbi,					Change in	Rate of
unless otherwise stated)	2020		2019	amount	change
							(%)
Fee and commission income
Agency and custody services fees	699,374		455,821	243,553		53.4
Settlement and clearing services fees	48,930		206,175	(157,245)		(76.3)
Bank card services fees	138,454		32,488	105,966		326.2
Fee and commission expense	(305,858)	(83,238)	(222,620)		267.4

Net fee and commission income	580,900		611,246	(30,346)		(5.0)

2. Net Trading Gains and Net Foreign Exchange Losses

In the first half of 2020, the Bank's net trading gains and net foreign exchange losses amounted to RMB703 million, representing a year-on-year increase of RMB416 million, mainly due to the increase in losses from the change in fair value arising from derivative financial instruments held by the Bank incurred at the end of the reporting period.

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

3. Net Gains Arising from Investments

In the first half of 2020, the net gains arising from financial investments of the Bank amounted to RMB2,335 million, representing a year-on-year decrease of RMB598 million or 20.4%, mainly due to the decrease in gains from the Bank's bond transaction spread and bond valuation, which was affected by the fluctuation of the bond market yield in the first half of the year.

		For the six months ended 30 June
(Expressed in thousands of Renminbi, unless					Change in	Rate of
otherwise stated)	2020	2019	amount	change
							(%)
Net gains on financial assets at fair value through
profit or loss	1,809,494	1,958,779	(149,285)	(7.6)
Net gains on disposal of financial assets at fair
value through other comprehensive income	451,829	810,368	(358,539)	(44.2)
Net gains on disposal of financial assets
measured at amortised cost	73,825	163,153	(89,328)	(54.8)
Dividends from designated as financial assets at fair
value through other comprehensive income	-	1,200	(1,200)	(100.0)

Total	2,335,148	2,933,500	(598,352)	(20.4)

24 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.1.7 Operating expenses

In the first half of 2020, the operating expenses of the Bank amounted to RMB2,213 million, representing a year-on-year increase of RMB202 million or 10.0%, and the cost-to-income ratio was 21.41%, representing a year-on-year increase of 2.35 percentage points. During the reporting period, the Bank brought in more specialized talents and strengthening the market-oriented incentive and restraint mechanism of pay according to performance and distribution according to workload, resulting in an increase in staff costs compared with the same period of the previous year. Based on the principle of combination retaining and reducing, the Bank optimized the expenses structure, resulting in a year-on-year decrease of office expenses and other general and administrative expenses.

		For the six months ended 30 June
(Expressed in thousands of Renminbi,					Change in	Rate of
unless otherwise stated)	2020	2019	amount	change
							(%)
Staff costs	1,263,516	1,093,697	169,819	15.5
Tax and surcharges	106,186	78,664	27,522	35.0
Depreciation and amortization	308,073	286,776	21,297	7.4
Rental and property management
expenses	40,907	32,442	8,465		26.1
Office expenses	148,022	160,127	(12,105)	(7.6)
Other general and administrative
expenses	345,979		359,341	(13,362)	(3.7)

Total operating expenses	2,212,683		2,011,047	201,636	10.0

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

1. Staff Costs

In the first half of 2020, staff costs of the Bank amounted to RMB1,264 million, representing a year-on-year increase of RMB170 million or 15.5%, mainly due to the introduction and election of a number of experienced and professional personnel optimizing the Company, retail and financial markets, and improving the market-oriented incentive and restraint mechanism resulting year-on-year increase in the salary, bonuses and allowances of staff.

The following table sets forth the principal components of the staff costs of the Bank for the periods indicated:

(Expressed in thousands of		For the six months ended 30 June
Renminbi, unless otherwise					Change in	Rate of
stated)	2020	2019	amount	change
							(%)
Salaries, bonuses and
allowances	1,036,518	747,049	289,469	38.7
Pension and annuity	64,945	124,121	(59,176)	(47.7)
Other social insurance	48,078	118,345	(70,267)	(59.4)
Housing allowances	57,434	47,723	9,711	20.3
Supplementary
retirement benefits	3,172	2,527	645	25.5
Others	53,369	53,932	(563)	(1.0)

Staff costs	1,263,516	1,093,697	169,819	15.5

26 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Office Expenses, Rental and Property Management Expenses
In the first half of 2020, office expenses, rental and property management expenses of the Bank amounted to RMB189 million, representing a year-on-year decrease of RMB4 million or 1.9%. Office expenses, rental and property management expenses mainly include office supplies, property rents, and maintenance fees for electronic devices, security fees, conference fees and postal, telecom and printing fees.
Depreciation and Amortization
In the first half of 2020, depreciation and amortization expenses of the Bank amounted to RMB308 million, representing a year-on-year increase of RMB21 million or 7.4%. The increase in depreciation and amortization expenses was primarily due to such increase caused by the setting up of financial technology and standardized outlets.
Other General and Administrative Expenses
In the first half of 2020, other general and administrative expenses of the Bank amounted to RMB346 million, representing a year-on-year decrease of RMB13 million or 3.7%.

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.1.8 Impairment losses on assets

In the first half of 2020, impairment losses on assets of the Bank amounted to RMB4,373 million, representing a year-on-year decrease of RMB224 million or 4.9%, mainly due to the decrease in the provision of asset impairment losses in accordance with the credit asset risk, as well as the year-on-year increase of the provision of asset impairment losses in this year, which was caused by the reversal of asset impairment losses in financial investment last year. The following table sets forth the principal components of the impairment losses on assets of the Bank for the periods indicated:

(Expressed in thousands of	For the six months ended 30 June
Renminbi, unless otherwise					Change in	Rate of
stated)	2020		2019	amount	change
							(%)
Deposits and placements
with bank and other
financial institutions	(334)	137,874	(138,208)		(100.2)
Financial assets held under
resale agreements	(2,427)	3,054	(5,481)		(179.5)
Loans and advances to
customers	4,116,855	4,806,729	(689,874)		(14.4)
Financial investments	165,697		(426,390)	592,087		(138.9)
Credit commitment	92,390		79,676	12,714		16.0
Others	731		(4,201)	4,932		(117.4)

Total	4,372,912		4,596,742	(223,830)		(4.9)

4.2.1.9 Income tax expense

In the first half of 2020, income tax expense of the Bank amounted to RMB407 million, representing a year-on-year increase of RMB22 million or 5.7%, which was mainly due to the year-on-year decrease in tax-free income.

28 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.2 Analysis of the Statement of Financial Position

4.2.2.1 Assets

As at 30 June 2020, total assets of the Bank were RMB1,058,389 million, representing an increase of RMB36,908 million or 3.6% as compared with that at the end of the previous year, mainly due to the increase in loans and advances to customers and financial investment. The principal components of our assets are (i) loans and advances to customers, (ii) financial investments, (iii) cash and deposits with Central Bank and
Deposits with banks and other financial institutions, which accounted for 47.3%, 41.4%, 7.2% and 1.0%, respectively, of total assets of the Bank as of 30 June 2020. The following table sets forth the principal components of assets of the Bank as at the dates indicated:

(Expressed in thousands of Renminbi,	As at 30 June 2020		As at 31 December 2019
unless otherwise stated)	Amount	of total	Amount	of total
				%						%
Assets
Total loans and advances to customers	512,774,537		48.4		457,202,375	44.8
Interest receivable	5,586,336		0.5		2,052,316	0.2
Provision for impairment losses	(16,594,446)	(1.6)		(12,879,170)	(1.3)
Net loans and advances to customers	501,766,427		47.3				446,375,521	43.7
Financial investments (1)	437,754,403		41.4		417,492,192	40.9
Deposits with banks and other financial
institutions	11,272,658		1.0				21,104,213	2.1
Cash and deposits with Central Bank	76,386,391		7.2				90,533,151		8.9
Financial assets held under resale
agreements	3,982,562		0.4				18,713,438		1.8
Placements with banks and other
financial institutions	5,899,576		0.6				8,198,954		0.8
Derivative financial assets	7,012,163		0.7				3,379,675	0.3
Other assets (2)	14,315,104		1.4		15,683,652	1.5

Total assets	1,058,389,284		100.0		1,021,480,796	100.0

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Notes:

Financial investments include financial assets at fair value through other comprehensive income, financial assets at amortised cost and other financial investments at fair value through profit or loss.
Includes property and equipment, deferred income tax assets and other assets.

1. Loans and Advances to Customers

The total loans and advances to customers made by the Bank as at 30 June 2020 amounted to RMB512,775 million with an increase of RMB55,572 million or 12.2% as compared with that at the end of last year, and accounted for 48.4% of the total assets, representing an increase of 3.6 percentage points as compared to the end of last year. The loans and advances to customers made by the Bank consisted mainly of corporate loans (including discounted bills) and personal loans.

(Expressed in thousands of	As at 30 June 2020	As at 31 December 2019
Renminbi, unless otherwise
stated)	Amount	of total	Amount	of total
			%			%
Corporate loans
－Corporate loans	390,933,257	76.3	374,201,172	81.8
－Discounted bills	58,344,294	11.4	25,488,939	5.6
Personal loans
－Residential mortgage	41,021,158	8.0	36,041,189	7.9
－Personal consumption loans	16,444,516	3.2	17,297,007	3.8
－Credit cards	5,318,867	1.0	3,568,235	0.8
－Personal business loans	694,675	0.1	587,963	0.1
－Others	17,770	0.0	17,870	0.0
Total loans and advances to

customers	512,774,537		100.0	457,202,375	100.0

30 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Corporate loans constituted the largest component of the Bank's loan portfolio. As at 30 June 2020, the corporate loans (including discounted bills) of the Bank amounted to RMB449,278 million, representing an increase of RMB49,587 million or 12.4% as compared to the end of last year and accounting for 87.7% of the total loans and advances to customers, mainly due to the fact that the Bank continuously improved the management system, strengthened customer base, promoted professional operation from top to bottom, focused on advantageous industries, mainstream customers, high-quality enterprise and mainstream products, to build the comprehensive corporate banking business with characteristics and values.

Personal loans offered by the Bank mainly include residential mortgage loan, personal consumption loans, credit cards and personal business loans. As at 30 June 2020, personal loans of the Bank amounted to RMB63,497 million with an increase of RMB5,985 million or 10.4% as compared with the end of last year, and accounted for 12.3% of total loans and advances to customers, representing an decrease of 0.3 percentage point. The Bank has established a profit-oriented,customer-centric,high-quality and fast-growing retail banking business model, and at the same time, it has established a diversified retail product system, an intelligent risk control system, a market-oriented organization and management system, and an agile technology support system. It provides favorable conditions for the grand retail growth.

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Loans by type of guarantee

The structure of collaterals of the Bank's loans and advances to customers was stable and the Bank's capability of mitigating risks was relatively solid. As at 30 June 2020, the balance of loans guaranteed or secured by mortgages and pledges was RMB475,125 million, representing an increase of RMB38,850 million or 8.9% as compared with that at the end of the previous year, and accounted for 92.7% of the total loans and advances to customers; and the balance of unsecured loans was RMB37,650 million, representing an increase of RMB16,722 million or 79.9% as compared with that at the end of the previous year, and accounted for 7.3% of the total loans and advances to customers. If a loan is secured by more than one form of collateral, the entire amount of such a loan is allocated to the category representing the primary form of collateral. The following table sets forth the distribution of loans and advances to customers by collateral type as at the dates indicated:

(Expressed in thousands of	As at 30 June 2020		As at 31 December 2019
Renminbi, unless otherwise stated)	Amount	of total	Amount	of total
			(%)				(%)
Loans secured by mortgages	197,934,442		38.6		182,487,244	39.8
Loans secured by pledges	102,343,427		20.0		73,889,168	16.2
Guaranteed loans	174,846,732		34.1		179,898,160	39.4
Unsecured loans	37,649,936		7.3		20,927,803		4.6
Total loans and advances to

customers	512,774,537		100.0	457,202,375	100.0

32 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

(Expressed in thousands of Renminbi, unless otherwise stated)

Changes in provision for impairment on loans and advances to customers
As at 30 June 2020, the balance of provision for impairment on loans and advances to customers was RMB16,594 million, representing an increase of RMB3,715 million or 28.8% as compared with that at the end of the previous year, mainly due to mainly due to the fact that in accordance with the principle of prudence and prudence, the Bank made reasonable provision for impairment of loans and advances based on loan growth and expected credit risk.

The following table sets forth the provision for impairment losses on loans and advances issued by the Bank on the dates indicated.

	For the six months ended 30 June 2020				2019
	A lifetime	A lifetime				A lifetime	A lifetime
	expected	expected				expected	expected
	credit loss -	credit loss -				credit loss -	credit loss -
Expected	loans without	loans with			Expected	loans without	loans with
credit loss in	credit	credit			credit loss in	credit	credit
the next	impairment	impairment			the next	impairment	impairment
12 months	loss	loss	Total	12 months	loss	loss	Total

Balance as at the beginning of
the period	5,480,833		1,429,810	5,968,527	12,879,170	3,640,867		1,200,134	5,517,585	10,358,586
Transferred to:
-to expected credit loss over
the next 12 months	354,975		(109,589)	(245,386)	-	7,289		(449)	(6,840)	-
-to lifetime expected credit losses:
not credit-impaired loss	(43,174)	567,426	(524,252)	-	(27,845)	27,986	(141)	-
-to lifetime expected credit losses:
credit-impaired loss	(26,279)	(164,721)	191,000	-	(70,228)	(158,886)	229,114	-
Net charge for the period	2,661,119	985,043	328,671	3,974,833	1,930,750	361,025	8,090,170	10,381,945
Transfer out	-	-	(259,584)	(259,584)	-	-	(8,203,540)	(8,203,540)
Write-offs	-	-	-	-	-	-	(15,046)	(15,046)
Recoveries	-		-		27		27		-		-	357,225	357,225
Balance as at the end of the period	8,427,474		2,707,969	5,459,003	16,594,446	5,480,833	1,429,810	5,968,527	12,879,170

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

2. Financial Investments

As of 30 June 2020, the financial investments (including financial assets at fair value through other comprehensive income, Financial assets measured at amortised cost, financial assets at fair value through profit or loss) of the Bank amounted to RMB437,754 million, representing an increase of RMB20,262 million or 4.9% as compared with those of the end of the previous year, and accounted for 41.4% of the total assets, representing an increase of 0.5 percentage point as compared with that at the end of the previous year. The following table set forth the main components of the Bank's financial investments (exclusive of interest receivable) as of the dates indicated:

(Expressed in thousands of Renminbi, unless otherwise	As at 30 June 2020		As at 31 December 2019
stated)	Amount	% of total	Amount	% of total
Financial assets at fair value through profit or loss	160,602,564		37.0	156,691,876	37.8
－Bonds issued by policy banks	905,788		0.2	383,136	0.1
－Bonds issued by banks and other financial institutions	42,286,311		9.7	39,179,506	9.4
－Corporate entity bonds	1,030,961		0.2	1,030,961	0.2
－Investment management products managed by
securities companies	115,704,504		26.7	116,098,273	28.1
－Investment management products under the trust
scheme	675,000		0.2	-	-
Financial assets at fair value through other
comprehensive income	44,862,649		10.4	32,964,176	8.0
- Government bonds	21,967,194		5.1	9,889,376	2.4
- Bonds issued by policy banks	15,617,476		3.6	15,548,565	3.8
- Bonds issued by banks and other financial institutions	1,452,621		0.3	1,415,436	0.3
- Corporate entity bonds	1,691,403		0.4	685,278	0.2
- Investment management products managed by securities
companies	-	-	1,107,105	0.3
- Equity investments	4,133,955		1.0	4,318,416	1.0
Financial assets measured at amortised cost	228,076,165		52.6	224,222,731	54.2
- Government bonds	62,640,101		14.5	58,487,011	14.1
- Bonds issued by policy banks	75,087,826		17.3	72,871,086	17.6
- Bonds issued by banks and other financial institutions	200,000		0.0	-	-
- Corporate entity bonds	832,186		0.2	3,342,022	0.8
- Investment management products managed by securities
companies	14,381,246		3.3	14,771,585	3.6
- Investment management products under the trust
scheme	77,104,560		17.8	76,775,572	18.6
Less: provisions for financial assets at amortised cost	(2,169,754)	(0.5)	(2,024,545)	(0.5)

Total	433,541,378		100.0	413,878,783	100.0

34 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Changes in the provision for financial assets at fair value through other comprehensive income

				For the six months ended 30 June 2020						2019
					A lifetime									A lifetime
				expected credit		A lifetime						expected credit
					loss - without	expected credit							loss - without	A lifetime
	Expected credit		credit	loss - with credit			Expected credit		credit	expected credit
	loss in the next		impairment		impairment			loss in the next		impairment	loss - with credit
		12 months		loss		loss	Total		12 months		loss	impairment loss	Total
Balance at the beginning of the
period	2,336			-		-	2,336	5,453		-		-	5,453
Net charge/(release) for the period	20,488			-		-	20,488	(3,117)		-		-	(3,117)

Balance as at the end of the period	22,824			-		-	22,824	2,336		-		-	2,336

Changes in the provision for financial assets measured at amortised cost

				For the six months ended 30 June 2020							2019
					A lifetime											A lifetime
				expected credit		A lifetime							expected credit		A lifetime
					loss - without	expected credit								loss - without	expected credit
	Expected credit	credit	loss - with credit			Expected credit		credit	loss - with credit
	loss in the next	impairment		impairment			loss in the next		impairment		impairment
		12 months		loss		loss	Total			12 months		loss		loss	Total
Balance at the beginning of the period	828,138	165,454	1,030,953	2,024,545	1,322,900		785,637	289,376	2,397,913
Transferred to：
- to lifetime expected credit losses
- with credit impairment loss	(3,876)	-	3,876		-	(59,881)	(6,717)	66,598		-
Net charge/(release) for the period	37,042	1,926		106,241		145,209		(434,881)	(613,466)	674,979		(373,368)

Balance as at the end of the period	861,304	167,380	1,141,070	2,169,754	828,138	165,454	1,030,953	2,024,545

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.2.2 Liabilities

As of 30 June 2020, total liabilities of the Bank amounted to RMB977,370 million, representing an increase of RMB35,011 million or 3.7% as compared with that at the end of the previous year. The components of the Bank's liabilities mainly consisted of (i) deposits from customers; (ii) Deposits and Placements from banks and other financial institutions; and (iii) Financial assets sold under repurchase agreements, accounting for 67.0%, 10.4% and 9.3%, respectively, with respect to the total liabilities.

The following table sets forth the components of the Bank's total liabilities as at the dates indicated:

(Expressed in thousands of Renminbi,	As at 30 June 2020		As at 31 December 2019
unless otherwise stated)	Amount	of total	Amount	of total
				(%)					(%)
Borrowings from Central Bank	6,839,521		0.7			6,793,977	0.7
Deposits from customers	655,559,388		67.0			655,070,994	69.5
Deposits and Placements from banks and
other financial institutions	101,930,677		10.4			96,837,332	10.3
Placements from banks and other
financial institutions	9,089,217		0.9			6,589,301	0.7
Financial liabilities at fair value through
profit or loss	25,078,940		2.6			26,520,878		2.8
Derivative financial liabilities	831,053		0.1			694,473		0.1
Financial assets sold under repurchase
agreements	90,607,636		9.3			60,117,133		6.4
Debt securities issued	74,860,982		7.7			80,993,054		8.6
Other liabilities (1)	12,572,388		1.3	8,741,669	0.9

Total	977,369,802		100.0	942,358,811	100.0

Note：

Including payment and collection clearance accounts, accrued staff cost, deferred income, taxes payable, dormant accounts and other liabilities.

36 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

1. Deposits from Customers

As of 30 June 2020, the Bank's total deposits from customers amounted to RMB641,707 million, with an increase of RMB279 million or 0.04% as compared with the number recorded at the end of the previous year. Corporate deposits decreased by RMB59,491 million compared with the end of the previous year, mainly due to the Bank focusing on consolidating the deposit base, optimizing the customer structure, actively reducing high-cost and low-efficiency deposits, focusing on high-quality customers in high-quality industries and improving capital stability, laying a solid foundation for high- quality and sustainable growth of corporate deposits in the future. Personal deposits increased by RMB69,486 million compared with the end of last year, mainly due to the continuous development of basic customers in retail, continuously promoting innovation in products, channels and services. The achievements in the construction of efficient retail banking system has been reflected. The following table sets forth the Bank's deposits from customers (exclusive of interest payable) and product types as of the dates indicated:

(Expressed in thousands of	As at 30 June 2020	As at 31 December 2019
Renminbi, unless otherwise
stated)	Amount	% of total	Amount	% of total
Corporate deposits
Demand deposits	138,202,011		21.5	190,952,618	29.8
Time deposits	190,366,285		29.7	197,106,655	30.7

Sub-total	328,568,296		51.2	388,059,273	60.5
Personal deposits
Demand deposits	23,542,780		3.7	37,732,968	5.9
Time deposits	258,043,770		40.2	174,367,690	27.2

Sub-total	281,586,550		43.9	212,100,658	33.1
Other deposits (1)	31,551,926		4.9	41,268,260	6.4

Total	641,706,772		100.0	641,428,191	100.0

Note:

Mainly includes pledged deposits.

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

2. Debt Securities Issued

The following table sets forth the components of the Bank's debt securities issued (exclusive of interest payable) as at the dates indicated:

	As at		As at
	30 June	31 December
(Expressed in thousands of Renminbi, unless	2020		2019
otherwise stated)	Amount		Amount
Tier two capital fixed rate debts maturing in
December 2025	10,000,000		10,000,000
Tier two capital fixed rate debts maturing in
December 2027	6,000,000		6,000,000
Financial fixed rate bonds maturing in
August 2021	2,000,000		2,000,000
Financial fixed rate bonds maturing in
August 2021	12,000,000	12,000,000
Financial fixed rate bonds maturing in
October 2021	8,000,000	8,000,000
Financial fixed rate bonds maturing in
November 2021	6,900,000	6,900,000
Certificates of interbank deposit	28,637,326	35,728,767

Total	73,537,326		80,628,767

The Bank issued tier-two capital bonds of commercial banks in the aggregate of RMB10 billion in the national inter-bank bond market on 4 December 2015. The term of maturity of such bonds is 10 years. The interest rate is calculated based on fixed interest rate per annum. The coupon rate is interest-bearing fixed rate of 4.57%. Interest on such bonds shall be paid once per year. Upon approval by the CBIRC, the Bank could choose to redeem the current bond in a lump sum at a whole or at a portion at the face value on the last day of the fifth interest calculating year for such bonds.

38 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

The Bank issued Tier-two Capital bonds of commercial banks in the aggregate of RMB6 billion on the national inter-bank bond market on 18 December 2017. The term of maturity of such bonds is 10 years. The interest is calculated per annum based on fixed interest rate. The coupon rate is interest-bearing fixed rate of 4.90%. Interest on such bonds shall be paid once per year. Upon approval by the CBIRC, the Bank could choose to redeem all or part of the current bonds in a lump sum at a whole or at a portion at the face value on the last day of the fifth interest calculating year for such bonds.

The Bank issued 2016 fixed rate financial bonds in the aggregate of RMB2 billion on 26 August 2016 with a term of maturity of 5 years and an annual coupon rate of 3.10%.

The Bank issued the first tranche of 2018 fixed-rate financial bonds in the aggregate of RMB12 billion on 15 August 2018 with a term of maturity of 3 years and an annual coupon rate of 4.35%.

The Bank issued the second tranche of 2018 fixed-rate financial bonds in the aggregate of RMB8 billion on 25 October 2018 with a term of maturity of 3 years and an annual coupon rate of 4.10%.

The Bank issued the third tranche of 2018 fixed-rate financial bonds in the aggregate of RMB6.9 billion on 26 November 2018 with a term of maturity of 3 years and an annual coupon rate of 3.98%.

As at 30 June 2020, the balance of certificates of interbank deposit issued by the Bank was RMB28,637 million.

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.2.3 Equity

As of 30 June 2020, the equity balance of the Bank amounted to RMB81,019 million, representing an increase of RMB1,897 million or 2.4% as compared with that at the end of the previous year. The following table sets forth the components of the equity of the Bank as of the dates indicated:

(Expressed in thousands of	As at 30 June 2020	As at 31 December 2019
Renminbi, unless otherwise
stated)	Amount	% of total	Amount	% of total
Share capital	8,796,680		10.9	8,796,680	11.1
Capital reserve	26,931,360	33.2	26,931,360	34.0
Surplus reserve	7,166,927	8.8	7,166,927	9.1
General reserve	13,676,444	16.9	13,398,535	16.9
Fair value reserve	(670,145)	(0.8)	399,979	0.5
Provision reserve	130,097	0.2	8,215	0.0
Deficit on remeasurement of
net defined benefit liability	(19,984)	(0.0)	(19,986)	(0.0)
Retained earnings	24,425,306	30.0	21,873,822	27.7
Non-controlling interests	582,797	0.8	566,453	0.7

Total equity	81,019,482		100.0	79,121,985	100.0

4.2.3 Loan quality analysis

In the first half of 2020, the Bank continued to improve the construction of its risk management system, improve its credit risk early warning and prevention and control mechanism, strengthen risk management and control in key areas and important links, steadily carry out the work of improving the quality of assets, and adhere to more prudent classification standards more than 90 days overdue loans were all included in non-performing loans, resulting in an increase in both the non-performing loans and non- performing loan ratio, potential non-performing risks declined and loan quality further improved.

40 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.3.1 Breakdown of loans by the five-category classification system

The non-performing loans of the Bank are classified into loans and advances to customers that are substandard, doubtful and loss. As of 30 June 2020, the non- performing loans of the Bank amounted to RMB12,758 million, impairment provision on loans and advances to customers amounted to RMB16,594 million, and the non- performing ratio was 2.49%, representing an increase of 0.74 percentage point as compared with that at the end of the previous year. The following table sets forth the distribution of the Bank's loans and advances to customers by the five-category loan classification system as of the dates indicated:

(Expressed in thousands of	As at 30 June 2020	As at 31 December 2019
Renminbi, unless otherwise
stated)	Amount	% of total	Amount	% of total
Normal	490,867,727		95.7	438,471,766	95.9
Special mention	9,148,794		1.8	10,725,971	2.3
Substandard	12,162,821		2.4		7,604,069		1.7
Doubtful	481,381		0.1		339,883		0.1
Loss		113,814		0.0		60,686		0.0
Total loans and advance to
customers	512,774,537		100.0	457,202,375	100.0


Non-performing loans	12,758,016		2.49	8,004,638	1.75

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.3.2 Concentration of loans

1. Concentration in terms of Industry and Distribution of Non-performing Loans

In the first half of 2020, the Bank adhered to the credit strategy of balancing advances and retreats, support and control, as well as protect and press and strengthened credit investment in key fields and key industries, in order to optimize credit structure. The following table sets forth the breakdown of loans and non-performing loans by industry as of the dates indicated:

				As at 30 June 2020							As at 31 December 2019
(Expressed in thousands of						Non-		Non-					Non-	Non-
Renminbi, unless otherwise	Loan amount	of total	performing		performing						performing	performing
stated)				%	loan amount	loan ratio (%)	Loan amount	% of total	loan amount	loan ratio (%)
Wholesale and retail trade	156,768,433		30.6	6,622,854	4.22	174,938,570	38.3	4,383,799	2.51
Renting and business activities	69,555,986		13.6	489,197	0.70	68,381,038	15.0	19,441	0.03
Real estate	62,220,656	12.1	840,347	1.35	35,280,158	7.7	675,309	1.91
Manufacturing	33,670,793	6.6	2,351,412	6.98	26,512,208	5.8	1,637,419	6.18
Construction	25,775,357	5.0	798,344	3.10	27,611,545	6.0	124,284	0.45
Culture, sports and entertainment	11,185,992	2.2	48,000	0.43	6,175,911	1.4	10,000	0.16
Transportation, storage and postal
services	3,828,068	0.7	91,540	2.39	4,114,725	0.9	68,560	1.67
Accommodation and catering	3,468,108	0.7	63,699	1.84	3,422,891	0.7	48,710	1.42
Production and supply of
electricity, heat, gas and water	3,069,645	0.6	47,458	1.55	3,548,293	0.8	9,478	0.27
Mining	2,153,271	0.4	107,280	4.98	2,488,580	0.5	19,597	0.79
Household Services and other
Services	2,031,680	0.4	-		-	2,142,419	0.5	-		-
Agriculture, forestry, animal
husbandry and fishery	588,799	0.1	61,579	10.46	1,161,819	0.3	15,450	1.33
Others	16,616,469	3.2	540,839	3.25	18,423,015	4.0	490,839	2.66
Discounted bills	58,344,294	11.4	-		-	25,488,939	5.6	-		-
Personal loans and advances	63,496,986	12.4	695,467	1.10	57,512,264	12.5	501,752	0.87

Total	512,774,537		100.0	12,758,016	2.49	457,202,375	100.0	8,004,638	1.75

Note ：Non-performing loan ratio of an industry is calculated by dividing the balance of non-performing loans of the industry by the balance of loans granted to the industry.

42 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

As of 30 June 2020, loans provided to customers of (i) wholesale and retail trade, (ii) renting and business activities sectors (iii) real estate, and (iv) manufacturing represented the largest components of the Bank's corporate loans. As at 30 June 2020 and 31 December 2019, the balance of loans provided to the corporate customers in the four industries mentioned above were RMB322,216 million and RMB305,112 million, respectively, accounting for 62.9% and 66.8%, with respect to the Bank's total loans and advances to customers.

2. Concentration in terms of Borrowers Loans to the ten largest single borrowers

The following table sets forth the borrowing amounts of the ten largest single borrowers as at 30 June 2020. As of the same date, all such loans were classified as normal loans:

(Expressed in thousands
of Renminbi, unless
otherwise stated)	As at 30 June 2020
Customer	Industry involved	Amount	of total (%)
Customer A	Renting and	9,500,000	1.85
	business activities
Customer B	Culture, sports and	8,000,000	1.56
	entertainment
Customer C	Renting and	7,601,000	1.48
	business activities
Customer D	Wholesale and	7,100,000	1.38
	retail trade
Customer E	Real estate	6,139,900	1.20
Customer F	Real estate	5,860,000	1.14
Customer G	Renting and	5,543,730	1.08
	business activities
Customer H	Manufacturing	5,541,900	1.08
Customer I	Real estate	5,300,000	1.03
Customer J	Real estate	5,130,000	1.00

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

3. Distribution of Non-performing Loans by Product Type

The following table sets forth the loans and non-performing loans by product type as of the dates indicated:

				As at 30 June 2020				As at 31 December 2019
(Expressed in thousands of					Non-	Non-			Non-	Non-
Renminbi, unless otherwise					performing	performing			performing	performing
stated)	Loan amount	loan amount	loan ratio	Loan amount	loan amount	loan ratio
							(%)				(%)
Corporate loans	449,277,551	12,062,548	2.68		399,690,111	7,502,886	1.88
Short-term loans	186,954,479	9,700,588	5.19		161,443,571	5,326,026	3.30
Medium and long-term loans	203,978,778	2,361,960	1.16		212,757,601	2,176,860	1.02
Discounted bills	58,344,294		-	-	25,488,939		-	-
Retail loans	63,496,986	695,468	1.10	57,512,264	501,752	0.87
Residential mortgage	41,021,158	246,914	0.60	36,041,189	211,835	0.59
Personal business loans	694,675	126,690	18.24	587,963	122,410	20.82
Personal consumption loans	16,444,516	156,243	0.95	17,297,007	92,677	0.54
Credit card overdrawn	5,318,867	165,621	3.11	3,568,235	74,830	2.10
Other	17,770		-	-	17,870		-	-

Total	512,774,537	12,758,016	2.49	457,202,375	8,004,638	1.75

As at 30 June 2020 and 31 December 2019, the non-performing loan ratio of the Bank, defined as non-performing loans divided by the Bank's total loans and advances to customers, was 2.49% and 1.75%, respectively.

As at 30 June 2020 and 31 December 2019, the non-performing loan ratio of the Bank's corporate loans (including discounted bills) was 2.68% and 1.88%, respectively.

As at 30 June 2020 and 31 December 2019, the non-performing loan ratio of the Bank's personal loan was 1.10% and 0.87%, respectively.

44 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.4 Analysis on Capital Adequacy Ratio

The Bank calculated and disclosed capital adequacy ratios in accordance with the relevant provisions of the Regulation Governing Capital of Commercial Banks (Provisional) (商業銀行資本管理辦法（試行)) (effective since 1 January 2013) promulgated by the former China Banking Regulatory Commission. As at 30 June 2020, the Bank's core Tier-one Capital adequacy ratio and Tier-one Capital adequacy ratio and the both 11.52%, increased by 0.04 percentage point from the end of the previous year; and the capital adequacy ratio was 14.37%, decreased by 0.17 percentage point from the end of the previous year. Capital adequacy ratios at all tiers satisfied the regulatory requirements of the new regulation. The following table sets forth the relevant information of the Bank's capital adequacy ratio as of the dates indicated.

	As at	As at
(Expressed in thousands of Renminbi, unless	30 June	31 December
otherwise stated)	2020		2019
Core capital
- Share capital	8,796,680		8,796,680
- Qualifying portion of capital reserve	26,931,360		26,931,360
- Surplus reserve	7,166,927		7,166,927
- General reserve	13,676,444		13,398,535
- Fair value reserve	(670,145)	399,979
- Provision reserve	130,097		8,215
- Retained earnings	24,425,306		21,873,822
- Qualifying portions of non-controlling interests	105,020		83,341
- Others	(19,984)	(19,986)
Core Tier-one Capital	80,541,705		78,638,873
Core Tier-one capital deductions	(188,164)	(192,308)
Net Core Tier-one Capital	80,353,541		78,446,565
Net Tier-one Capital	80,353,541		78,446,565

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

	As at	As at
(Expressed in thousands of Renminbi, unless	30 June	31 December
otherwise stated)	2020		2019
Tier-two Capital
－Qualifying portions of tier-two capital instruments
issued	16,000,000		16,000,000
－Surplus provision for loan impairment	3,836,430		4,874,532
Net tier-two Capital	19,836,430		20,874,532

Net capital base	100,189,971		99,321,097


Total risk weighted assets	697,309,662		683,238,647
Core tier-one Capital adequacy ratio	11.52%		11.48%
Tier-one Capital adequacy ratio	11.52%		11.48%
Capital adequacy ratio	14.37%		14.54%

46 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.5 Segment information

4.2.5.1 Summary of regional branches

The Bank is mainly operating within China. Its 18 branches are located in five provinces and municipalities directly under the Central Government. It also established seven subsidiaries in Liaoning Province, Shanghai and Zhejiang Province.

(Expressed in					Operating income						Non-current assets (1)
			For the period ended 30 June
thousands of
	2020		2019				30 June 2020		31 December 2019
Renminbi, unless
otherwise stated)		Amount		Percentage		Amount	Percentage		Amount	Percentage	Amount	Percentage
				(%)					(%)				(%)	(%)
Northeast China	9,344,776		95.0	9,091,060	89.6		6,392,691	95.6	6,315,864	95.2
North China	308,727	3.1	655,024	6.5		263,287	3.9	281,612	4.2
Others	185,229		1.9	391,498	3.9		35,323	0.5	37,864	0.6

Total	9,838,732		100.0	10,137,582	100.0		6,691,301	100.0	6,635,340	100.0

Note:

Non-currentassets include property and equipment, intangible assets, right-of-use assets and land use rights.

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.5.2 Summary of business segments

Since this year, the Bank adhered to the concept of "returning to its roots and focusing on principal businesses" by accelerating the establishment of large company and sizable retail business and optimizing the business structure of the same industry. In the first half of 2020, the operating income of corporate banking business amounted to RMB6,258 million, accounting for 63.6% of the total operating income. The operating income of retail banking business amounted to RMB788 million, accounting for 8.0% of the total operating income. The operating income of treasury business amounted to RMB2,653 million, accounting for 27.0% of the total operating income.

The Bank manages its business by dividing its business into several business segment based on business lines and geographical areas. The business segments have been reported in the same way as such information is reported internally, which is provided to the Bank's management for allocating resources to and evaluating results of the business segments. The Bank identified the following reporting segments to be reported based on its business segments:

		For the period ended 30 June
(Expressed in thousands of	2020			2019
Renminbi, unless otherwise
stated)	Amount	of total %	Amount	of total %
Operating income
Corporate banking	6,258,274		63.6	6,020,074		59.4
Retail banking	787,665			8.0		878,200		8.7
Treasury business	2,653,064			27.0		3,234,037		31.8
Others	139,729			1.4		5,271			0.1
Total	9,838,732			100.0	10,137,582		100.0

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.2.6 Off-balance Sheet Commitments

The following table sets forth the Bank's credit commitments as at the dates indicated:

	As at	As at
(Expressed in thousands of Renminbi, unless	30 June	31 December
otherwise stated)	2020		2019
Credit Commitments
Bank acceptances	130,363,383	146,246,742
Letters of guarantees	9,115,868	6,897,886
Letters of credit	14,285,974	11,159,555
Unused credit card commitments	13,344,263	10,617,675

Total	167,109,488		174,921,858

Note: For details of the off-balance sheet commitments, please refer to the "Credit Commitments" of Commitments and Contingent Liabilities in Note 38 to Financial Statements in the "Review Report of the Independent Auditors" section of this report.

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.3 BUSINESS OVERVIEW

4.3.1 Corporate Banking Business

The Bank insisted on focusing on the advantageous industry and strategic customer base with a large driving effect, broad growth prospects and risks that are quantifiable and controllable, and fully promote the professional business model of the industry. Focus was also placed on the construction of basic systems such as team, mechanism, product, technology and processes so as to drive breakthroughs in key businesses with system construction. In terms of operating relating to corporate customers operations, in accordance with the two-level management and three-level marketing mode of operation, the Bank continued to intensify the development of its capabilities in respect of basic customer operation, focused on improving its execution and market-oriented management level, effectively developed a business system that employed the "systematic marketing and sales at the frontline + product follow-up at the front office + assurance and support at the back office", and provided customers with differentiated services and Integrated Product Program by following the customer-centric approach.

4.3.1.1 Corporate deposits

By adhering to the basic policy of "taking deposits as the key foundation of the Bank", actively seized market opportunities, persistently deepening the identification of key customers, and focusing on the category of "high quality customers in high quality industries and mainstream customers in mainstream industries", the Bank reinforced the marketing mode under the three-tier operational system comprising the head office, branches and sub-branches, promoted smooth development of key customers and key projects, strengthened the expansion capabilities of industrial chains as well as upstream and downstream for core customers, thus the development of customer structure showed a diversified, varied and high-level development trend. The Bank took various measures to actively absorb stable deposits at low cost, allocated resources efficiently and scientifically, formulated development plans for product research and development, devised an overall marketing plan and accomplished centralized investment of resources in key industries and core products. With the enhancement of the market influence and competitiveness of the Bank was enhanced continuously, and the foundation for corporate deposit growth was consolidated continuously. As of 30 June 2020, the balance of corporate deposits of the Bank amounted to RMB328,568 million.

50 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Corporate Loans
The Bank insisted on continuously improving the quality and efficiency of serving the real economy. With the support of key strategies and key projects of China, the Bank closely followed the national industrial policy, further promoting the growth of the regional economy, focused on competitive industries, and allocated credit resources to key areas and weak points of economic and social development. The Bank increased its support for green industries, technology innovation enterprises, private enterprises and small and micro enterprises. The Bank also optimized resource allocation, strengthened the duration management of credit assets, insisted on revitalizing its stock, and continuously increased its effort in recovering maturing loans, accelerated the flow of existing loans, and enhanced the liquidity of the bank's assets, Further, in expanding its scope of customer service, the Bank simultaneously improved the management level of the liquidity of, and the profit contribution from its asset business. There was also a continuous enhancement in the usage efficiency of credit capital and a persistent increase in the differentiated and refined management levels of customers. As of 30 June 2020, the balance of RMB corporate loans (excluding discounted bills) of the Bank amounted to RMB390,933 million, representing an increase of RMB16,732 million or 4.5% from the end of last year.
Trade Finance
The Bank actively implemented the national policies and measures of "stabilizing foreign trade" and "stabilizing foreign investment", took the customer as the center, provided trade settlement, trade financing, credit guarantee, supply chain finance and other one-stop comprehensive financial services. The Bank strengthened product innovation, in-depth industry research, and constantly enhanced the service ability for trade finance. As of 30 June 2020, the balance of trade financing in and out of the bank's balance sheet was RMB37,159 million, an increase of 25.3% compared with the end of last year, the clearance volume of the trade finance business was USD16,917 million, representing a year-on-year increase of 20.1%. Revenue from the trade finance business intermediary business amounted to RMB152 million.

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.3.2 Retail banking

The Bank was committed to establish an efficiency-oriented,customer-centric and high-quality retail banking operating system. In doing so, the bank firstly formulated multiple measures to focus on business operations, and took concerted efforts to increase the contribution from retail business. Through detailed management measures such as personal deposit, personal loan, wealth management, credit card, channel construction and scenario marketing, the scale of retail business was enlarged rapidly, and the contribution of retail business to the whole bank was increased comprehensively. Secondly, the Bank accelerated the building of a differentiated and specialized operating system for wealth management customers, mass finance customers and retail credit customers to create a sustainable development model. The Bank also developed ancillary service capability to perfect its diversified retail product system, an intelligent risk control system, a market-oriented organizational management system and an agile technology support system to open a new chapter in retail banking.

4.3.2.1 Personal Deposits

As the Bank had taken a firm attitude towards the implementation of the basic policy of "taking deposits as the key foundation of the Bank", it promoted the continuous growth of retail liabilities through multiple channels and a full range of products. Firstly, with respect to strengthening the Bank's ability in acquiring basic customers and operating the relevant business through special marketing of agency business targeted at general customers, the bank was equipped with differentiated exclusive rights and customized exclusive products, which enabled it to build an intelligent- based payroll platform and to intensify cooperation in relation to batch payments and large-scale collections on an agency basis. Secondly, with respect to the special marketing activities for deposits targeting at wealth customers, for target customers whose deposits had become due and who were subject to high-quality agency service or were potentially fallen into critical threshold, measures such as warm-up contact, follow-up invitation and on-site marketing were implemented step by step. Thirdly, with respect to the enhancement of the construction of branch network on a persistent basis, in term of the customer operation, work deployment, atmosphere creation, daily management and other aspects, the Bank comprehensively enhanced customer identification, product sales, event planning, process optimization and other capabilities in offering comprehensive services, which resulted in improving network productivity. Fourthly, with respect to the acceleration of the innovation and research and development of products, the Bank designed and developed a

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series of special themed deposit receipts such as true feelings, reunion, and New Year by combining the same with emotional communication and festival etiquette and other elements, and set up an intelligent-based transfer platform for time deposits to meet the diverse needs of customers. As of 30 June 2020, the balance of personal deposits of the Bank was RMB281,587 million, representing an increase of RMB69,486 million, or 32.8%.

Personal Loans
The Bank continued to deepen its retail credit transformational development. Firstly, the Bank took the initiative to promote the development of personal housing mortgage loan business, actively worked together with leading real estate companies throughout China to promote mortgage business cooperation for quality projects, implemented the name-list system management, continuously optimized business processes, and perfected the entry management. Secondly, the Bank accelerated the pace of business restructuring, actively expanded the existing high-quality retail customer base, launched exclusive consumer credit products, and created a QR code equipped with the real-timepre-approval function for granting housing mortgage loans, so as to improve customer experience and promote loan placement. Thirdly, the Bank accelerated the construction of personal loan products system and service functions. Through integration of resources, construction of specialized teams and implementation of a full-process management and control, the Bank comprehensively enhanced the comprehensive operation capabilities relating to retail credit products. As of 30 June 2020, the balance of its personal loans amounted to RMB63,497 million, representing an increase of RMB5,985 million, or 10.4%.
Bank Cards
The Bank proactively promoted the business innovation of bank card products. By continuously expanding the application of bank cards in on-line and off-line payment scenarios such as on campus, during transportation and for smart parking purpose, all of which related to the customer's daily life such as clothing, food, accommodation, travel and entertainment, creating product functions such as asset transfer and fund certification underlying in the bank cards, and further enhancing customer service capabilities and service experience, the Bank was able to promote the steady development of bank card business. As of 30 June 2020, the Bank issued 15,434,800 debit cards in total, representing an increase of 556,300 cards from the beginning of the year, and the total amount of consumer transactions amounted to RMB29,416 million.

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4.3.2.4 Assets Management

The asset management business of the Bank was based on the development concept of "serving the whole bank's customers for offering comprehensive financing service, serving the whole bank's customers for offering wealth management service, serving the whole bank's customers for promoting a stable deposit growth". By taking customer demand as the core and developing marketable "hit" products, the Bank intensively and meticulously developed fixed-income product lines, focused on the complementary advantages of wealth management products, on-balance sheet liability products and agency sales products, which enabled itself to effectively meet the differentiated needs of its customer groups. The Bank had also made every effort to expand the endogenous momentum and extension boundaries of fund, to build a system for precise marketing in form of "electronic channel + physical channel", which resulted in further expanding the flow of high-quality customers. The Bank introduced advanced concepts such as large-scale asset allocation and asset portfolio management, established an asset allocation system that comprehensively considered liquidity, profitability and compliance, effectively enhanced its active management capability and risk control capability, and formed a new pattern of steady and orderly revenue growth for our asset management business. As of 30 June 2020, the current scale of the Bank's wealth management amounted to RMB61,986 million with a realized revenue of RMB408 million, and the net value ratio was 42.98%, representing an increase of 8.82 percentage points compared with the beginning of the 2020.

4.3.3 Capital and investment banking business

The Bank's capital business adhered to the coordinated and unified operating principle of "safety, liquidity and profitability". Firstly, it took the advantage of the phased market conditions under the loose monetary policy and accordingly optimized the structure of the financial market product portfolio, captured the right time to carry out band operation with an aim to constantly improving its trading capacity. Secondly, the adoption of measures such as implementing supporting policies, developing customized products and providing targeted guidance enabled the Bank to further secure its market position by acquiring mainstream customers and high-quality asset projects, which resulted in effectively enhancing its comprehensive marketing benefits. As of 30 June 2020, the Bank had a scale of the capital business of RMB480,235 million, and achieved a profit before taxation of RMB2,314 million.

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Money Market Transactions
In accordance with the needs of asset and liability management, the Bank strengthened the construction of financing channels to maintain reasonable and safe liquidity across the Bank, maintained and expanded inter-bank customer relations, consolidated the inter-bank customer base, and effectively expanded financing sources. At the same time, the Bank gave play to the liquidity transmission role of the inter-bank market, adhered to the management of the liquidity mutual assistance reserve fund in Liaoning Province, and ensured a stable, smooth and efficient operation of the liquidity mutual assistance mechanism. In order to effectively balance the relationship between liquidity and profitability, the Bank continuously improved the level of inter-bank debt control, consciously and proactively carried out market making, and reduced the weighted financing cost rate on a continuous basis so as to reduce the cost of money market business and to increase efficiency. As of 30 June 2020, the balance of deposits and placements from banks and other financial institutions and financial assets sold under repurchase agreements was RMB201,628 million, representing 20.6% of total liabilities of the Bank. The balance of deposits and placements with banks and other financial institutions and financial assets held under resale agreements was RMB21,155 million, representing 2.0% of the total assets of the Bank.
Investments in Securities and Other Financial Assets
Since the beginning of the 2020, due to the economic weakness and the epidemic situation, there was a significant fluctuation in the bond yield rate in the market. Based on the analysis of the market trend, the Bank captured the opportunity to operate the bond band and effectively increased the premium income level. The Bank tracked fund investment income on a daily basis, and dynamically adjusted fund investment structure in a timely manner based on fund business performance to increase the level of income during the holding period. By accelerating the creation of investment banking products, the Bank successfully issued corporate credit asset backed securities making it the first city commercial bank to issue inter-bank credit asset securitization products in 2020. The Bank actively participated in the anonymous click business in the inter-bank market to increase transaction activities while grasping the pulse of interest rate changes. and was rated as an X-Lending active institution in the first half of the 2020.

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4.3.4 Specialised institutions and subsidiaries

4.3.4.1 Financial service center for Small Businesses

The financial service center for small businesses of the Bank attached great importance to financial services of small and micro enterprises and thoroughly implemented various inclusive financial policies of the State and regulatory agencies. By strengthening its responsibility, the financial service center for small businesses actively implemented the concept of inclusive finance, focused on the strategic vision of "building a sound bank", insisted on serving the real economy, improved the service system, streamlined business processes, and effectively improved the availability and inclusiveness of financial services.

The Bank intensified its policy support on the scale of loans to small and micro enterprises to ensure that credit funds were effectively granted to inclusive small and micro enterprises. The Bank also further implemented customer-oriented strategies and targeted supply chains, business circle, governments, guarantee providers, insurance companies as its main customer acquisition channels with an aim to achieve granting loans to small and micro enterprises in the form of "1 + N, 1 + 1". On the basis of the business traction of traditional small and micro enterprises, the Bank will continue to develop innovative products exclusively for small and micro enterprises and created a variety of product systems to meet the financial needs of small and micro enterprises which were of different types and in different stages of development, and to provide diversified and one-stop financing service for high- quality small and micro enterprises.

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4.3.4.2 Credit card center

The credit card center of the Bank took the pursuit of high-quality development as its top priority, actively promoted the transformation from "scale" to "efficiency", insisted in operating business in a compliant and stable manner, and strived to achieve effective customer acquisition at low cost and in large scale. Firstly, the Bank continued to enrich its product offerings by launching brand new premium platinum card, Tencent micro-plus card, Tuhu Co-branded Card and "Chechifen" products. Secondly, the bank took the concept of "science and technology" into practice, and launched the online operation of Life APP2.0 and credit card N2+ system. Thirdly, the Bank completed the FICO risk analysis and consultation project in time by making use of the intelligent-base risk control measures. Fourthly, the Bank strengthened its cross-border cooperation, and cooperated with the China UnionPay to carry out the promotional activities of "fighting the epidemic and promoting consumption", and worked together with Baidu, JD, Meituan and Suning to create a new ecosystem of online customers, so as to realize multi-channel and all-round customer acquisition operations as well as to effectively improve customer loyalty. Fifthly, in accordance with the relevant requirements as set forth in notices issued by the China Banking Insurance Regulatory Commission, services such as deferred repayment and reduction of interest were made available to cardholders affected by the epidemic, which resulted in a cumulative reduction of customer interest and liquidated damages of approximately RMB500,000.

As of 30 June 2020, there were in aggregate 1,434,500 credit cards issued by the Bank, representing an increase of 331,400 cards or 30.0% from the beginning of the year; the aggregated transaction amount reached RMB14,898 million, representing a year-on-year increase of 241.8%, and trading volume in a single month exceeded RMB2,800 million; the balance of existing credit card loans amounted to RMB5,319 million, representing an increase of RMB1,751 million or 49.1% from the beginning of the year.

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Shengjing Bank Consumer Finance Co., Ltd.
Shengjing Bank Consumer Finance Co., Ltd. ("Shengjing Consumer Finance") was the first consumer financial company established by the Bank as its major contributor and was approved to start business in February 2016. In the first half of 2020, the company focused on vigorously implementing the work theme of "identifying strategies, controlling risk, enhancing team-building". The Bank also steadily improved the level of corporate governance, actively expanded financing channels, strengthened brand building and publicity, promoted the construction of information technology system, continuously strengthened comprehensive risk management, and continued to promote business transformation and development. Through closely integrating the features through which the company secured its market position, namely "inclusive finance, online scenarios, shareholder ecology and Liaoshen characteristics", the company had built its core competitiveness characterized by high-quality talents, high-tech guidance, and high-level risk control, which gradually developed itself into a boutique consumer finance company with industry influence.
As at 30 June 2020, Shengjing Consumer Finance had the total assets of RMB4,179 million, the loan balance of RMB3,766 million and an aggregate of 3,021,700 customers to whom the company provide services for. During the Reporting Period, Shengjing Consumer Finance achieved an operating income of RMB299 million, a profit before provision of RMB658,562 million and a non-performing loan ratio of 0.19%.
Village banks
As of 30 June 2020, the Bank was the principal contributor to jointly establish six Village Banks, four of which are located in Shenyang City in Liaoning Province, being Shenyang Shenbei Fumin Rural Bank, Shenyang Xinmin Fumin Village Bank, Shenyang Faku Fumin Rural Bank, Shenyang and Liaozhong Fumin Village Bank; the other two being Ningbo Jiangbei Fumin Rural Bank in Ningbo, Zhejiang Province and Shanghai Baoshan Fumin Rural Bank in Shanghai. All six Fumin Village Banks are independent legal entities.

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The Village Banks established by the Bank actively implemented the Bank's overall development strategy, faithfully fulfilled their social responsibilities, adhered to the business philosophy of "supporting agriculture, rural areas and farmers", positioned itself in the market "based on villages and towns, serving agriculture, rural areas and farmers, and supporting small and micro enterprises", and serviced customers that are small and micro enterprises in counties and the market-oriented rural households. In the principle of granting credit in small-amount and diversified way, it provided financial services to customers in the form of small-amount credit products, and effectively promoted the operation and development of Village Banks. During the Reporting Period, the Bank improved the management mode of the Village Banks, and strengthened the guidance and support to the operation development and risk control of the Village Banks through the efficient coordination and cooperation between the head offices and branches.

4.3.5 Distribution Channels

4.3.5.1 Physical Outlets

The Bank accelerated the planning and layout of outlets. As of 30 June 2020, the Bank operated businesses through its head office, 3 branch-level specialised institutions, 18 branches and 178 traditional sub-branches and 6 small and micro sub-branches, together with 6 village banks and one Shengjing Bank Consumer Finance Co., Ltd. which are located in 18 cities including Shenyang, Beijing, Shanghai, Tianjin, Changchun, Dalian and other cities in Liaoning Province. Most of the operating institutions are located in developed regions such as Northeast China Region, the Bohai Rim and the Yangtze River Delta Economic Zones, which enjoy distinctive advantageous policies and huge market opportunities.

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Self-serviceBanking
The Bank accelerated the transformation of smart outlets to form a relatively comprehensive intelligent financial service system, focused on promoting the functional service upgrade of popularization and application of smart counter, remote video banking and high-speed cash recycling system, strengthened the monitoring and management of self-service equipment, improved use efficiency, released human resources, realized the combination of online and offline services, and further improved service functions and customer experience. As of 30 June 2020, the Bank owned 1,743 self-service facilities, including cash recycling systems, inquiry and payment machines, card activating machines, VTMs, online banking machines, mobile banking machines, smart counters, high-speed cash recycling systems and interactive desktops.
Electronic Banking
1. Online Banking
In order to provide better service to corporate customers to further enhance the corporate customer service experience, the Bank actively promotes the digital transformation, to update the corporate online banking 2.0, and to enrich online products. As at 30 June 2020, the Bank had a total of 36,900 online banking corporate customers, representing an increase of 15.0% compared to the end of the previous year; in the first half of 2020, the number of corporate online banking transactions reached 714,100, and the transaction amount was accumulated at RMB899,279 million.
The Bank persists in taking the customer as the center and continues to improve the functions and experience of personal online banking to meet customers' needs for convenient, safe and efficient online business processing. As of 30 June 2020, there were a total of 634,000 personal online banking In the first half of the 2020, the number of transactions reached 419,400 and the transaction amount was accumulated at RMB41,697 million.

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2. Mobile Banking

The Bank actively promoted the upgrading of mobile end application services represented by mobile banking. The Bank continued to upgrade the functions of mobile banking, launched mobile banking wealth version for wealth customers, improved the customer application experience, and provided customers with smart, friendly and characteristic mobile financial service platform. By focusing on the daily needs of the customers, expanding services to online consultation, convenient payment and other life scenarios services function, the Bank offered customers with fast, friendly "finance + life" services. As of 30 June 2020, there were a total of 2,237,400 mobile banking customers, an increase of 18.8% compared with the beginning of the year; In the first half of 2020, the total number of mobile banking customers reached 2,237,400, an increase of 18.8% over the beginning of the year; the accumulated transaction amount was RMB117,352 million, representing an increase of 645.7% over the same period of the previous year. The number of transactions reached 4,717,800, representing an increase of 151.8% over the same period of the previous year.

4.3.6 Information Technology and R&D

In the first half of 2020, the Bank accelerated the transformation of its information technology function to facilitate business expansion, participated in business innovation and R&D transformation, comprehensively enhanced the application value of information technology, and effectively enabled the business development of the whole Bank. Firstly, with respect to the adjustment of the strategy of information technology, by firmly following the overall development goals which served as the guidance for the Bank's development, the Bank prepared the "Shengjing Bank Co., Ltd. Information Technology Development Plan of 2020-2022", and developed innovative business models and service processes. It also promoted the in-depth integration of information technology and business, and put the idea of shifting technology from cost-centered to value-centered into practice. Secondly, with respect to optimizing the information technology architecture and improved the system operating capacities, projects relating to the upgrade of traditional core systems and comprehensive large-scalefront-end systems were carried out to improve business processing efficiency and to lay down the foundation for an application architecture that meets future development needs. Thirdly, with respect to technology that enable the business development of the whole Bank, through placing focus on customer

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experience, the Bank restructured its business processes, consolidated the payment infrastructure, enriched products and functions, achieved public-private collaboration, broadened customer acquisition channels, which resulted in successively launching the online operation of 8 information systems, such as the Internet open platform, retail credit management system, the specific online banking system for enterprises under the new generation, unified payment platform, online double recording system, and 419 business functions online work.

4.4 RISK MANAGEMENT

During the Reporting Period, the Bank focused on optimizing and improving the risk management system, establishing and improving various risk management systems, further refining the assignment system relating to risk director and credit risk early warning system, building a comprehensive risk management system integrated with the transformation and upgrading of business models, to realize the overall management of all kinds of risks, and to strengthen the risk awareness and compliance awareness of employees at all levels of the Bank, which resulted in effectively mitigating the existing risk and also controlling the new risk. At the same time, the Bank attached great importance to the instability and uncertainty caused by the COVID-19 pandemic to the domestic and foreign economies, earnestly implemented the national decision and deployment of epidemic prevention and control, actively adjusted and optimized risk management and control strategies, and actively responded to all kinds of potential risks, effectively alleviated the adverse impact of the epidemic. Firstly, with respect to the continuous improvement of the risk management decision-making system, the Bank revised the working system of the risk management committee under senior management and its credit review committee, and created the credit risk early warning committee. Secondly, in deepening the construction of credit risk management and control system, the Bank formulated annual credit policy and industry-specific credit policy guidelines, improved the key links of the credit process, optimized the credit review and approval process, strengthened risk early warning management and control, strictly controlled new risks, and continuously consolidated asset quality. Thirdly, with respect to strengthening the management and control of market risk limits, the Bank paid close attention to the changes in monetary policy and market interest rates, strengthened the monitoring of limit implementation, dynamically adjusted and optimized the position structure, and effectively controlled market risks. Fourthly, for the purpose of establishing and improving operational its risk management and control mechanisms, the Bank strengthened its process control, system control and personnel management, intensified its internal control efforts in conducting comprehensive investigation and imposing effective rectification measures relating to compliance and operational at a reasonable level. Fifthly, with respect to the enhancement of

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liquidity risk resilience, the Bank optimized and improved liquidity risk management mechanisms and procedures, effectively prevented short-term payment risks, implemented liquidity risk limit management mechanisms, and improved the medium and long-term liquidity risk prevention and control capabilities. Sixth, with respect to the improvement of the level of prevention and control over information technology risk. The Bank established and improved its information technology risk monitoring, assessment and control mechanism, continued to strengthen information system security self-examination and inspection, and steadily improved the level of information technology risk monitoring.

4.4.1 Credit Risk Management

Credit risk occurs when customers or counterparties are unable or unwilling to perform their obligations to the Bank. The credit risk exposure of the Bank mainly exists in the credit business and treasury business.

During the Reporting Period, the Bank proactively adjusted and optimized its credit policy. By adhering to the business philosophy of "taking compliance as the key foundation of the Bank", and by following the principle of controlling the substantial risks and preventing the ultimate risks, the Bank implemented the product-driven business strategies, optimized industry and customer incremental arrangements, better consolidated its credit position by reducing or eliminating risks, and operated all business is an orderly and healthy manner through continuous optimization of its credit review and approval mechanism, and enhancement of the standardization and professionalism of credit management, all of which were based on the financing activities within the industry. Firstly, the credit system and mechanism was continuously improved. In keeping with the requirements of regulatory policies and in line with the strategic development needs, the Bank initially set up a professional review and approval mechanism with hierarchical classification, continuously improved the credit management system, continuously enriched the means and methods of credit management, and continuously improved the management of credit process, and continuously improved the quality and efficiency of credit review and approval. Secondly, the optimization of the asset structure achieved remarkable results. The Bank adhered to the principle of matching risks and benefits, focused on mainstream industries and mainstream customers such as strategic customers, regional leading enterprises and high-quality private enterprises, implemented industry financial policies and product- driven strategies to meet customers' operational and financing needs, conducted pre-risk demonstration, and comprehensively used product structure, business model, risk pricing, risk control measures and other credit arrangements. Accordingly, the asset structure of

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the Bank was further optimized to the extent that risks were controllable. Thirdly, in order to promote the orderly transformation of its existing business by way of classification, by adhering to the principle of maximizing the protection of rights and interests, adopting classified measures as the means, taking adjustment of the existing portfolio by either enhancing or and reducing accounts as the starting point with a focus on tackling tough problems, the Bank strengthened its risk protection measures by adding guarantor and mortgaged assets and locking in repayment arrangements to gradually reduce the risk of exposure. Further, in response to the relevant national policy, the Bank provided reasonable loan renewal support to customers who are more affected by the COVID-19 pandemic.

4.4.2 Operational Risk Management

Operational risk refers to the risk of loss caused by inadequate or problematic internal procedures, personnel and information technology systems as well as external events.

The operational risk management objective of the Bank is to resolve various operational risks by establishing and improving the operational risk governance structure, identifying high-risk areas, and improving the level of operational risk management and control through effective risk control and mitigation measures. During the Reporting Period, the Bank continued to strengthen its risk management and control and operational risk investigation in terms of systems, processes, systems and personnel to achieve effective rectification. Firstly, the Bank continued to improve the construction of institutional system. By paying attention to the new regulations and new policies of the regulatory authorities, the Bank was able to ensure the applicability, effectiveness and standardization of the institutional system and operational links, and established a process management system with clear division of labor among the front, middle and back offices and mutual restraints. Secondly, the Bank strengthened the operational risk prevention capabilities. It effectively carried out operational risk assessment, identified and evaluated potential operational risks for existing and newly launched important products, business activities, business processes, information technology systems, personnel management, external factors and their changes, analyze the effectiveness of existing control activities, and proposed optimized control measures. Thirdly, the Bank increased its efforts in conducting the operational risk investigation. By combining the methods of on-site and off-site, regular and irregular, self- inspection and inspection, the Bank carried out various special risk investigations, which resulted in strengthening the monitoring and management of operational risks. The Bank also paid attention to vulnerabilities which frequent give rise to operational risks, and continued to correct the hidden risks in order to avoid the occurrence of the incidents.

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4.4.3 Market Risk Management

Market risk refers to the risk of losses in the Bank's on-balance sheet and off-balance sheet business due to adverse changes of market prices (interest rates, exchange rates, commodity prices and stock prices etc.), mainly including interest rate risk and exchange rate risk.

1 Market Risk of Bank Accounts

Interest Rate Risk Management of Bank Accounts
The interest rate risk in the banking accounts refers to risks of losses in economic value and overall income in the banking book due to adverse changes in interest rate level, term structure and other elements, including gap risk, basis risk and option-related risk. Among which, the gap risk is the main interest rate risk faced by the Bank. The Bank mainly applied gap analysis, scenario simulation and stress test to measure, monitor and analyse interest rate risk of bank accounts.
During the Reporting Period, the outbreak of COVID-19 pandemic had a huge impact on global economy, and the oil price war and international issues further aggravated the complexity of the macro-environment, resulting in strong fluctuation in the financial market and also a constant increase in external uncertainties. Domestically, with more flexible and moderate monetary policies formulated by the central bank, and reasonable and sufficient market liquidity, the overall financial market remained stable, and the comprehensive application of LPR and the implementation of stock conversion further improved the transmission mechanism of monetary policies, and the reform of interest rate marketization continued to deepen. In the first half of 2020, the interest rate center represented a trend of rapid decline in the early stage and relative rise later, with the overall interest rate level representing a slight decrease compared with the end of the previous year. In this regard, in accordance with the latest revised Implementation Rules for the Stress Test on Interest Rate Risk Associated with Bank Accounts of Shengjing Bank (For Trial Implementation), the Bank carried out stress tests on a quarterly basis, enriched scenario setting of interest rate risk stress test of bank accounts, and added extreme scenario stress test to the re-pricing risk stress test, resulting

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in further improving the effectiveness of stress tests. The Bank paid close attention to changes in the market interest rate and changes in the Bank's repricing cycle and gap in the LPR conversion process, actively managed the interest rate risk of bank accounts, fully utilized the guiding role of FTP to moderately extend the debt duration, and effectively managed the interest rate risks of the Bank' banking accounts by making adjustments to the re-pricing cycle of deposits and loans and the types of fixed and floating interest rates according to the target gap.

Exchange Rate Risk Management of Bank Accounts
Exchange rate risk refers to the risk arising from the mismatch of the currency denominations between assets and liabilities. The Bank's exposure to the exchange rate risk is mainly arisen from proprietary foreign exchange businesses and the mismatch of currency denominations between deposits and loans.
During the Reporting Period, the Bank mainly applied foreign exchange exposure analysis to measure the size of exchange rate risk, and managed its foreign exchange risk by matching assets denominated in foreign currency with corresponding liabilities in the same currency. During the Reporting Period, the Bank's business operation was mainly denominated in RMB and the foreign exchange exposure accounted for an immaterial percentage of the total assets. The Bank's exchange rate risk continued to remain within the management objectives.

2. Market Risk of Trading Accounts

During the Reporting Period, the Bank continued to improve the market risk management structure, constantly enhanced the limit management system of inter-bank market risks, conducted quantitative evaluation for market risks and continued to assess limit indicators by items of exposure limit and stop-loss limit by applying such measurement methods as sensitivity analysis, duration, and Value of Risk (VaR) in the management of market risks in a comprehensive way. The Bank also carried out stress testing by making regular scenario assumptions

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in the occurrence of extremely adverse scenarios. The Bank conducted periodical re-evaluation work for market risk management to verify the effectiveness of limit management and conducted post-event tests against stress tests as well as evaluation and improvement for market risk measurement model on basis of the re-evaluation results. The Bank re-evaluated the market value and monitored indicators on a daily basis and assessed the execution of market risk limit on a monthly basis. The Bank also regularly carried out stress testing on market risks, and identified that each market risk indicator operated in a stable manner and there was no occurrence of limit excision.

4.4.4 Liquidity Risk Management

Liquidity risk refers to the risk of failure to timely obtain adequate funds at a reasonable cost to repay debts when due, perform other payment obligations, or satisfy other capital needs in the ordinary course of business.

During the Reporting Period, the Bank actively complied with the national macro-control policies, implemented regulatory requirements, constantly optimized and improved the management system and mechanism and procedures of liquidity risks on basis of a cautious and stable liquidity risk preference and enhanced liquidity risk management in an active and forward-looking way so as to ensure that the overall management measures were reasonable and effective, and also the liquidity of the Bank was stable and safe. Firstly, the Bank captured the favorable opportunity of periodical looseness in inter-bank market to optimize and adjusted the asset to liability structure, increased the reserve scale of liquidity assets, extended the duration of interbank liabilities as appropriate. and reasonably controlled indicators such as deposit to loan ratio and inter-bank liability ratio to gradually built a "fortress-style" asset to liability structure. Secondly, the Bank improved the construction of liquidity management system, carried out re-inspection on liquidity management system and amended the "Implementation Rules for Capital Position Management of Shengjing Bank" to further optimize and improve the liquidity reserve system and mutual assistance mechanism, and to ensure a smooth and efficient operation of the liquidity management system and procedures. Thirdly, the Bank strictly complied with management strategies, policies and procedures of liquidity risks and regulated liquidity risks management through cap management system, tier two reserve management system and capital position provision system and authorization system for large amount historical

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accounts to enhance the prevention and control level of liquidity risks. Fourthly, the Bank strengthened the monitoring of liquidity indicators and limit management, monitored large amount capital transactions and changes in positions in real-time and scientifically set up liquidity gaps with various durations, all of which ensured that the payment and settlement process were conducted in a safety manner and that the liquidity regulatory indicators continued to meet the standards.

4.4.5 Information Technology Risk Management

Information technology risk refers to the risk that may occur to the Bank's operation, reputation or legal compliance in the process of applying information technology in the Bank due to factors such as natural factors, human factors, technological limitations and management inadequacy.

During the Reporting Period, the Bank has implemented various safety management and control measures to further strengthen prevention and control level on information technology risks. Firstly, the Bank enhanced internal control by newly establishing and revising information technology systems regarding fields including system research and development, operation and maintenance management, safety management to constantly improve the construction of technology management systems. Secondly, the Bank conducted comprehensive review of safety control measure, identified weak sections in information safety, optimized short boards of safety prevention and protection and formulated a three-year development scheme for the construction of information safety system to constantly strengthen the safe technology prevention and protection system. Thirdly, the Bank carried out specific investigations regarding safety assessment on the electronic banking system, internet safety risk and outsourcing risks to identify potential risks timely and conduct rectification therein. Fourthly, the Bank engaged professional third party information safety service agencies to carry out routine safety review on the internet- based information system, monitor and control on phishing websites and counterfeit APPs and monitor internet safety, for the purpose of building up a safety defense line for internet application system. Fifthly, the Bank constantly conducted assessment and internal control on changing and releasing risks to guarantee safe and stable operation of information system.

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4.4.6 Reputational Risk Management

Reputational risk refers to the risk that may cause negative comments on the Bank from the stakeholders due to the acts relating to the Bank's operation, management and other aspects or other external incidents.

During the Reporting Period, the Bank valued highly reputational risk management and took active measures to carry out prevention and control on and response to reputational risks. Firstly, the Bank strictly implemented 7*24 monitoring on public opinions to improve the timeliness and accuracy for monitoring, research and judgement and reporting of public opinions, and gave timely warnings on public opinion risks and strengthened emergency response to ensure early identification and rapid settlement of negative public opinions. Secondly, the Bank carried out regular investigation and warning on potential reputational risk factors and promoted the prevention and control on and treatment of risk sources by focusing on hot topics and main issues under the concern of media. Thirdly, the Bank established normalized external communication system with main media, regulatory departments and other relevant departments to address negative public opinions in a timely way. Fourthly, the Bank participated in trainings for public opinion analysts held by competent authorities in the industry to actively enhance professional literacy on analysis, research and judgement on public opinions and on emergency response and settlement. Fifthly, the Bank utilized media resources to the maximum to actively make public highlights of the Bank's operating results, material strategic measures, service offerings for small and medium enterprises, prevention and control on the COVID-19 pandemic and popularizing of financial knowledge to create a harmonious and sound public opinion environment.

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MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.4.7 Compliance Risk Management

Compliance risk refers to the risk of suffering from legal sanction, regulatory punishment, significant financial loss or reputation loss due to failure to comply with relevant laws, rules and codes of conduct.

The Bank advocates the principle of "compliance first" and deepens the concept of "taking compliance as the foundation". Sticking to high level compliance with provisions of laws, regulations and regulatory requirements and rules and regulations of the Bank, the Bank conducts various operation management activities on basis of precautional operation to effectively implement the compliance management policy of "regulated behaviour, strong inspection, effective mechanism, and proper monitoring". During the Reporting Period, faced with the continuing trend of "strong and strict regulation", the Bank actively adjusted to new regulatory requirements, understood compliance orientation in a proper manner and ensured proper communication of regulatory requirements to further improve the effective system for internal control and compliance management. Firstly, the Bank continuously improved the compliance risk management system. The Bank strictly implemented the compliance risk management policy of the Bank, stuck to compliance operation, strengthened the bottom line mindset and implemented construction of whole process compliance mechanism to achieve effective identification and management of compliance risks. Secondly, the Bank strengthened its compliance risk prevention capabilities. The Bank effectively carried out system evaluation work, strengthened pre-argument of research and development of new business and new product, and improved compliance management functions such as compliance audit, compliance inspection, assessment and evaluation to achieve effective identification, monitoring, evaluation, management and reporting of compliance risks. The Bank took effective control measures against identified issues to safeguard compliance operation. Thirdly, in accordance with requirements of the CBIRC, the Bank carried out the work of "strengthening results of chaos control to facilitate compliance construction" and laid further foundation for internal control and compliance management by conducting comprehensive and integrated treatment in equity and corporate governance, macro policy implementation and credit management and other aspects.

70 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.4.8 Money Laundering Risk Management

The Bank strictly complied with national anti-money laundering laws and regulations and solidly performed statuary obligations and social responsibilities in respect of anti-money laundering. During the Reporting Period, the Bank continued to deepen the management of money laundering risk, and the overall level of anti-money laundering work of the Bank improved steadily. Firstly, the Bank conducted in-depth implementation of the requirements of each anti-money laundering law and regulation and strengthened the comprehensiveness and efficiency of systems to effectively improve the money laundering risk management and control capabilities of the Bank. Secondly, the Bank conscientiously implemented the "risk-based"anti-money laundering working principle, constantly optimized the anti-money laundering monitoring system, and strengthened the management of anti-money laundering and anti-terrorism financing monitoring list to constantly improve the management level of anti-money laundering and anti-terrorism financing. Thirdly, the Bank strictly implemented customer identification, and the system of identity information, transaction record preservation and the suspicious transaction reporting system, adhered to the risk orientation to continuously carry out anti-money laundering inspection and assessment and improve the quality and efficiency of anti-money laundering work. Fourthly, the Bank actively organized anti-money laundering training. In line with the latest situation and rules and regulations of anti-money laundering work, the Bank organized top-down learning and training in the Bank to further enhance the sense of responsibility and initiative of the Bank in anti-money laundering work. Fifthly, the Bank actively carried out anti-money laundering publicity activities. The Bank further promoted the effectiveness of illegal fund- raising and crime crackdown to further improve the public's understanding of anti-money laundering work, and intensified the crackdown on and prevention from money laundering risks to jointly create a good social atmosphere for anti-money laundering.

Interim Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.4.9 Country-specific Risk Management

Country-specific risks represent the risks of economic, political and social changes and developments in a country or region that may cause borrowers or debtors in that country or region to be unable or unwilling to fulfil their obligations to banking financial institutions, or incur loss to commercial presences of banking financial institutions in that country or region, or other loss to banking financial institutions in that country or region. It mainly exists in business activities such as credit, international capital market business, establishment of overseas institutions, agency transactions, and outsourcing services provided by overseas service providers.

During the Reporting Period, in strict compliance with the relevant regulatory requirements of country-specific risk management, the Bank continued to promote country-specific risk management, closely monitored changes in country-specific risks, and conducted whole process management and control on business involved and regular country-specific risk assessment. As at the end of the Reporting Period, the Bank is exposed to immaterial country-specific risk and the overall country-specific risks are under control.

72 Shengjing Bank Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

4.5 FUTURE PROSPECTS AND DEVELOPMENT STRATEGY

In 2020, the COVID-19 pandemic has brought unprecedented impacts on China's economic and social development. With effective control against the outbreak, enterprises progressively resumed operation and production under active national backup, resulting in the economic growth turning from negative to positive results in the second quarter, which represented super resilience and great potential in our national economy. However, the COVID-19 pandemic is still under global expansion and global economy faces multiple uncertainties and instabilities. Against such background, the Central Party has formulated requirements of "six protections" on basis of the "six stabilizations", the Central Bank has adopted sound monetary policies that are more flexible and appropriate, strengthened counter-cyclical adjustment to maintain reasonable and sufficient liquidity in the banking system, ensure stable operation in financial market, and guide commercial banks in improving their financial service capability, all of which aim to support the development of small and medium-sized enterprises, so as to comprehensively boost economic development.

The Bank will actively change the development concept by focusing on the strategic vision of "being a sound bank", stick to return to its roots and adhere to its principal business, comprehensively improve the level of refined management and enhance endogenous growth drivers. Firstly, adhere to the basic policy of "taking deposits as the key foundation of the Bank"(存款立行), focus on customers of "high quality customers in high quality industries and mainstream customers in mainstream industries", enhance customers loyalty through product and service innovation, increase deposit marketing efforts, and consolidate and expand core deposit growth capabilities. Secondly, strengthen asset and liability management, strengthen interest rate pricing, reasonably control capital costs, further optimize the ratio of interbank liabilities, and create "fortress-style" asset and liability structure. Thirdly, continue to improve the construction of the risk management system, strengthen the effectiveness of the operation of the matrix risk management system, improve the operation efficiency of the resident system of risk supervisors, strengthen unified credit management, and comprehensively enhance the ability to prevent new risks. Fourthly, closely follow the national policy guidance, practice the concept of inclusive finance, help the development of small, medium and micro enterprises, provide precise financial services for the real economy, and achieve integrated and resonant development with the real economy.

Looking forward to the second half of 2020, there is coexistence of opportunity and challenge, hope and difficulty. The Bank will stick to its development concepts, maintain its strategic positioning and proactively address challenges with determination and confidence in wining the hard fight. The Bank will enhance employee cohesion and strive bravely to, under the premise of guaranteeing quality and efficiency, achieve scale improvement and push forward high quality development with all due efforts.

Interim Report 2020

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS

As at 30 June 2020, the Bank had a total of 8,796,680,200 Shares, comprising 6,455,937,700 Domestic Shares and 2,340,742,500 H Shares. During the Reporting Period, there was no change in the shareholding.

At 31 December 2019	Change during the Reporting Period	At 30 June 2020
			Issue of
Number	Percentage	new shares	Others	Sub-total	Number	Percentage
	(%)						(%)

1. Shareholding of Domestic

Shares by legal persons	6,334,189,139	72.01	nil	nil	nil	6,334,189,139	72.01
Of which:
1.1	Shareholding of state-
	owned legal persons	715,743,100	8.14	nil	nil	nil	715,743,100	8.14
1.2	Shareholding of private
	legal persons	5,618,446,039	63.87	nil	nil	nil	5,618,446,039	63.87

2. Shareholding of Domestic

	Shares natural persons	121,748,561		1.38	nil	nil	nil	121,748,561	1.38
3.	H Shares	2,340,742,500	26.61	nil	nil	nil	2,340,742,500	26.61

Total		8,796,680,200		100.00	nil	nil	nil	8,796,680,200	100.00

Note:

At the end of the Reporting Period, the Bank had 3,464 holders of Domestic Shares and 147 holders of H Shares. In respect of the holders of Domestic Shares, 37 are state-owned shareholders, 106 are private corporate shareholders and 3,321 are natural person shareholders.

74 Shengjing Bank Co., Ltd.

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

5.1 PARTICULARS OF SHAREHOLDINGS OF THE TOP TEN SHAREHOLDERS OF DOMESTIC SHARES OF THE BANK

As at 30 June 2020, the top ten Shareholders of the Domestic Shares of the Bank are as follows:

	Nature of	Total number	Shareholding	Number of
No. Name of Shareholder	Shareholder	of Shares held	percentage	Shares pledged
			(%)

1 Evergrande Group (Nan Chang) Co., Ltd. (恒大集團（南昌）有限公司)("Evergrande Nan

	Chang")	Private	3,201,680,000		36.40	0
2	Shenyang Hengxin State-owned Assets
	Management Group Co., Ltd. (瀋陽恒信國有資
	產經營集團有限公司)("Shenyang Hengxin")	State-owned	479,836,334	5.45	0
3	Liaoning Huibao International Investment Group
	Co., Ltd. (遼寧匯寶國際投資集團有限公司)
	("Huibao International"))	Private	400,000,000	4.55	400,000,000
4	Xinhu Zhongbao Co., Ltd. (新湖中寶股份有限公
	司)("Xinhu Zhongbao")	Private	300,000,000	3.41	80,000,000
5	Founder Securities Co., Ltd. (方正證券股份有限
	公司)("Founder Securities")	Private	300,000,000	3.41	0
6	Shanghai Changxin Group Co., Ltd. (上海昌鑫（集
	團）有限公司)("Shanghai Changxin")	Private	200,000,000	2.27	0
7	Lianmei Group Co., Ltd. (聯美集團有限公司)
	("Lianmei Group")	Private	200,000,000	2.27	0
8	Shenyang Zhongyou Tianbao (Group) Materials
	and Equipment Co., Ltd.(瀋陽中油天寶（集團）
	物資裝備有限公司)("Zhongyou Tianbao")	Private	190,000,000	2.16	0
9	Shenyang Dayang Decoration Engineering Co.,
	Ltd. (瀋陽大洋裝飾工程有限公司)("Shenyang
	Dayang")	Private	120,000,000	1.36	59,760,000
10 Shenyang Wuai Industrial Co., Ltd.(瀋陽五愛實業
	有限公司)	State-owned	118,159,093	1.34	0

Total			5,509,675,427		62.63	539,760,000

Interim Report 2020

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

5.2 INTERESTS AND SHORT POSITIONS OF THE SECURITIES AND FUTURE ORDINANCE (THE "SFO") OF HONG KONG

As at 30 June 2020, to the knowledge of the Directors after making reasonable enquiries, the interests of substantial shareholders (as defined under the SFO) as recorded in the register required to be kept under Section 336 of the SFO, other than the Directors, Supervisors or chief executive, in the Domestic Shares and underlying Shares of the Bank under Divisions 2 and 3 of Part XV of the SFO and as recorded in the register required to be kept under Section 336 of the SFO were as follows:

			Percentage
			of the total
			number of	Percentage
			Domestic	of the total
	Nature of	Number of Domestic	Shares of the	share capital
Name of Shareholder	Interests	Shares held	Bank	of the Bank
			(%)	(%)
China Evergrande Group(1)	Interest of a controlled	3,201,680,000	49.59	36.40
	corporation	(Long position)
Shenyang Hengxin(2)	Beneficial owner	479,836,334	7.43	5.45
		(Long position)
Shenyang Industrial	Interest of a controlled	479,836,334	7.43	5.45
Investment Development	corporation	(Long position)
Group Co., Ltd. (瀋陽產業
投資發展集團有限公司) (2)
Huibao International(3)	Beneficial owner	400,000,000	6.20	4.55
		(Long position)
Chenjingyi (Beijing) Cultural	Interest of a controlled	400,000,000	6.20	4.55
Development Co., Ltd. (辰	corporation	(Long position)
景怡（北京）文化發展有限公
司)(3)
Li Yuguo(3)	Interest of a controlled	400,000,000	6.20	4.55
	corporation	(Long position)

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CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

Notes:

China Evergrande Group (a Hong Kong listed company incorporated in the Cayman Islands; stock code:3333) is interested in 3,201,680,000 Domestic Shares. Such shares are held by Evergrande Nan Chang, an indirect wholly-owned subsidiary of China Evergrande Group.
According to the register of shareholders of the Bank as at 30 June 2020, Shenyang Hengxin held 479,836,334 Domestic Shares. Shenyang Hengxin was wholly-owned by Shenyang Industry Investment Development Group Co., Ltd. (瀋陽產業投資發展集團有限公司), which was in turn wholly- owned by the State-owned Assets Supervision and Administration Commission of Shenyang Municipal People's Government. By virtue of the SFO, Shenyang Industrial Investment Development Group Co., Ltd. (瀋陽產業投資發展集團有限公司) is deemed to be interested in the Shares held by Shenyang Hengxin.
According to the register of shareholders of the Bank as of 30 June 2020. Huibao International held 400,000,000 Domestic Shares in the Bank. Huibao International was wholly-owned by Chenjingyi (Beijing) Cultural Development Co., Ltd. (辰景怡（北京）文化發l展有限公司), which was in turn controlled by Mr. Li Yuguo (李玉國) as Chenjingyi (Beijing) Cultural Development Co., Ltd. (辰景怡（北京）文化發展有限公司) is accustomed to act in accordance with Mr. Li Yuguo's direction pursuant to an agreement entered into between Mr. Li Yuguo and Chenjingyi (Beijing) Cultural Development Co., Ltd. By virtue of the SFO, Chenjingyi (Beijing) Cultural Development Co., Ltd. and Mr. Li Yuguo are deemed to be interested in the Shares held by Huibao International.

Interim Report 2020

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

As at 30 June 2020, to the knowledge of the Directors after making reasonable enquiries, the interests of substantial shareholders (as defined under the SFO) as recorded in the register required to be kept under Section 336 of the SFO, other than the Directors, Supervisors or chief executive, in the H Shares and underlying Shares of the Bank under Divisions 2 and 3 of Part XV of the SFO were as follows:

			Percentage
			of the total	Percentage
			number of	of the total
		Number of H	H Shares of	share capital
Name of Shareholder	Nature of Interests	Shares held	the Bank	of the Bank
			(%)	(%)
Zhengbo Holdings	Beneficial owner	400,000,000	17.09	4.55
Limited(1)		(Long position)
Suen Cho Hung, Paul(1)	Beneficial owner/Interest	420,898,500	17.98	4.78
	of a controlled	(Long position)
	corporation
Future Capital Group	Beneficial owner	400,000,000	17.09	4.55
Limited(2)		(Long position)
Lo Ki Yan, Karen(2)	Beneficial owner/Interest	410,610,000	17.54	4.67
	of a controlled	(Long position)
	corporation
Cheung Chung Kiu(3)	Beneficial owner/Interest	324,651,500	13.87	3.69
	of a controlled	(Long position)
	corporation
Murtsa Capital Limited(4)	Beneficial owner	203,676,000	8.70	2.32
		(Long position)
Satinu Resources Group	Interest of a controlled	204,284,000	8.73	2.32
Ltd.(4)	corporation	(Long position)
Oshidori International	Interest of a controlled	193,034,000	8.25	2.19
Holdings Limited(5)	corporation	(Long position)
Cheng Yu Tung Family	Interest of a controlled	179,518,060	7.67	2.04
(Holdings II) Limited(6)	corporation	(Long position)
Cheng Yu Tung Family	Interest of a controlled	179,518,060	7.67	2.04
(Holdings) Limited(6)	corporation	(Long position)
Chow Tai Fook (Holding)	Interest of a controlled	179,518,060	7.67	2.04
Limited(6)	corporation	(Long position)
Chow Tai Fook Capital	Interest of a controlled	179,518,060	7.67	2.04
Limited(6)	corporation	(Long position)
Chow Tai Fook Nominee	Beneficial owner/Interest	179,518,060	7.67	2.04
Limited(6)	of a controlled	(Long position)
	corporation

78 Shengjing Bank Co., Ltd.

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

Notes：

Suen Cho Hung, Paul directly held 20,898,500 H Shares of the Bank. Zhengbo Holdings Limited held 400,000,000 H Shares of the Bank. Zhengbo Holdings Limited was wholly-owned by Mr. Suen Cho Hung, Paul. By virtue of the SFO, Zhengbo Holdings Limited and Mr. Suen Cho Hung, Paul are deemed to be interested in the Shares held by Zhengbo Holdings Limited.
Lo Ki Yan, Karen directly held 610,000 H Shares of the Bank. Future Capital Group Limited held 400,000,000 H Shares of the Bank. Future Capital Group Limited was wholly-owned by Ms. Lo Ki Yan, Karen. Planetree Treasury Ltd held indirectly 10,000,000 H Shares of the Bank. Ms. Lo Ki Yan, Karen held 68.08% interests in Planetree Treasury Ltd. By virtue of the SFO, Ms. Lo Ki Yan, Karen is deemed to be interested in the Shares held by Future Capital Group Limited and Planetree Treasury Ltd.
Cheung Chung Kiu directly held 299,651,500 H Shares of the Bank. Worthwell Investments Limited held 25,000,000 H Shares of the Bank. Worthwell Investments Limited was wholly-owned by Mighty Gain Enterprises Limited; Mighty Gain Enterprises Limited was wholly-owned by C C Land Holdings Limited; C C Land Holdings Limited was owned by Fame Seeker Holdings Limited as to 52.99%; Fame Seeker Holdings Limited was wholly-owned by Windsor Dynasty Limited;Windsor Dynasty Limited was wholly-owned by Mr. Cheung Chung Kiu. By virtue of the SFO, Mighty Gain Enterprises Limited, C C Land Holdings Limited, Fame Seeker Holdings Limited, Windsor Dynasty Limited and Mr. Cheung Chung Kiu are deemed to be interested in the Shares held by Worthwell Investments Limited.
Murtsa Capital Limited held 203,676,000 H Shares of the Bank. Murtsa Capital Limited was wholly- owned by Satinu Capital (HK) Limited; Satinu Capital (HK)Limited was wholly-owned by Satinu Holdings Limited; Satinu Holdings Limited was wholly-owned by Satinu Resources Group Ltd. By virtue of the SFO, Satinu Capital (HK) Limited, Satinu Holdings Limited and Satinu Resources Group Ltd. are deemed to be interested in the shares held by Murtsa Capital Limited.
Satinu Markets Limited held 608,000 H Shares of the Bank. Satinu Markets Limited was wholly-owned by Satinu Holdings Limited; Satinu Holdings Limited was wholly-owned by HEC Securities Company Limited; HEC Securities Company Limited was wholly-owned by Satinu Resources Group Ltd. By virtue of the SFO, Satinu Holdings Limited, HEC Securities Company Limited and Satinu Resources Group Ltd. are deemed to be interested in the shares held by Satinu Markets Limited.

Interim Report 2020

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

Smart Jump Corporation (incorporated in the British Virgin Islands) held 3,034,000 H Shares of the Bank. Smart Jump Corporation (incorporated in British Virgin Islands) was wholly-owned by Smart Jump Corporation (incorporated in the Cayman Islands); Smart Jump Corporation (incorporated in Cayman Islands) was wholly-owned by Smart Jump Corporation (incorporated in the Marshall Islands); Smart Jump Corporation (incorporated in the Marshall Islands) was wholly-owned by Win Wind Capital Limited; Win Wind Capital Limited was wholly-owned by Oshidori International Holdings Limited. By virtue of the SFO, Smart Jump Corporation (incorporated in the Cayman Islands), Smart Jump Corporation (incorporated in the Marshall Islands), Win Wind Capital Limited and Oshidori International Holdings Limited are deemed to be interested in the shares held by Smart Jump Corporation (incorporated in British Virgin Islands).
Nu Kenson Limited held 190,000,000 H Shares of the Bank. Nu Kenson Limited was wholly-owned by Win Wind Intermediary Financial Services Limited; Win Wind Intermediary Financial Services Limited was wholly-owned by Win Wind Capital Limited;Win Wind Capital Limited was wholly-owned by Win Wind Capital Limited; Win Wind Capital Limited was wholly-owned by Oshidori International Holdings Limited. By virtue of the SFO, Win Wind Intermediary Financial Services Limited, Win Wind Capital Limited and Oshidori International Holdings Limited are deemed to be interested in the shares held by Nu Kenson Limited.
Acemax Enterprises Limited held 50,776,620 H Shares of the Bank. Acemax Enterprises Limited was wholly-owned by Chow Tai Fook Nominee Limited. By virtue of the SFO, Chow Tai Fook Nominee Limited is deemed to be interested in the shares held by Acemax Enterprises Limited.
Oceanic Fortress Limited held 76,164,940 H Shares of the Bank. Oceanic Fortress Limited was wholly- owned by Chow Tai Fook Nominee Limited. By virtue of the SFO, Chow Tai Fook Nominee Limited is deemed to be interested in the shares held by Oceanic Fortress Limited.
Chow Tai Fook Nominee Limited directly held 52,576,500 H Shares of the Bank. Chow Tai Fook Nominee Limited was owned by Chow Tai Fook (Holding) Limited as to 99.90%; Chow Tai Fook (Holding) Limited was owned by Chow Tai Fook Capital Limited as to 81.03%; Chow Tai Fook Capital Limited was owned by Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited, respectively, as to 48.98% and 46.65%.

By virtue of the SFO, Chow Tai Fook (Holding) Limited, Chow Tai Fook Capital Limited, Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited are deemed to be interested in the Shares held by Chow Tai Fook Nominee Limited.

Save as disclosed above, the Bank is not aware of any other person (other than the Directors, Supervisors and the chief executive (as defined under the Listing Rules) of the Bank) having any interests or short positions in the shares or underlying Shares of the Bank as at 30 June 2020 as recorded in the register required to be kept by the Bank pursuant to Section 336 of the SFO.

80 Shengjing Bank Co., Ltd.

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

5.3 SHAREHOLDERS HOLDING 5% OR MORE OF THE TOTAL SHARE CAPITAL

As at the end of the Reporting Period, Evergrande Nan Chang and Shenyang Hengxin held 3,201,680,000 Domestic Shares and 479,836,334 Domestic Shares of the Bank respectively, representing 36.40% and 5.45% of the Bank's total share capital, respectively.

5.4 INFORMATION ON SUBSTANTIAL SHAREHOLDERS AND DE FACTO CONTROLLERS OF DOMESTIC SHARES

Below is the information on the Bank's substantial shareholders and their controlling shareholders, de facto controllers, related parties, persons acting in concert and ultimate beneficiaries as at the end of the Report Period. For the definition of relevant concepts, please see the relevant requirements of the Interim Measures for the Shareholding Management of Commercial Banks (《商業銀行股權管理暫行辦法》) issued by the CBIRC.

				Reasons of	Number of
				being a	shares			Parties	Ultimate
	Name of	Number of	Shareholding	substantial	pledged	Controlling		acting in	beneficial
No. shareholder	Shares held	percentage	shareholder	(number)	shareholder	De facto controller	concert	owner
1	Evergrande	3,201,680,000	36.40%	Holding 5%	0	China Evergrande	Hui Ka Yan	Nil	Evergrande
	Nan Chang			of more of		Group			Nan Chang
				the Bank's
				shares and
				appointing
				director
2	Shenyang	479,836,334	5.45%	Holding 5%	0	Shenyang Industrial	State-owned Assets	Nil	Shenyang
	Hengxin			of more of		Investment	Supervision and		Hengxin
				the Bank's		Development	Administration
				shares and		Group Co., Ltd.	Commission
				appointing		(瀋陽產業投資發展	of Shenyang
				director		集團有限公司)	Municipal
							Government

Interim Report 2020

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

				Reasons of	Number of
				being a	shares			Parties	Ultimate
	Name of	Number of	Shareholding	substantial	pledged	Controlling		acting in	beneficial
No. shareholder	Shares held	percentage	shareholder	(number)	shareholder	De facto controller	concert	owner
3	Huibao	400,000,000	4.55%	Appointed	400,000,000	Chenjingyi	Li Yuguo	Nil	Huibao
	International			director		(Beijing) Cultural			International
						Development Co.,
						Ltd. (辰景怡（北京）
						文化發展有限公司)
4	Xinhu Zhongbao	300,000,000	3.41%	Appointed	80,000,000	Zhejiang Xinhu	Huang Wei	Nil	Xinhu Zhongbao
				director		Group Co., Ltd
5	Founder	300,000,000	3.41%	Appointed	0	Peking University	Peking University	Nil	Founder
	Securities			director		Founder Group o.,			Securities
						Ltd. (北大方正集團
						有限公司)
6	Shanghai	200,000,000	2.27%	Appointed	0	Chen Zhaogui	Chen Zhaogui	Nil	Shanghai
	Changxin			supervisor					Changxin
7	Lianmei Group	200,000,000	2.27%	Appointed	0	Lhasa Economic	Su Zhuangqiang	Nil	Lianmei Group
				Supervisor		and Technological
						Development
						Zone Lianmei
						Holdings Co., Ltd.
						(拉薩經濟技術開發
						區聯美控股有限公
						司)
8	Shenyang	120,000,000	1.36%	Appointed	59,760,000	Yu Haobo	Yu Haobo	Nil	Shenyang
	Dayang			supervisor					Dayang
9	Liaoning Huafeng	100,000,000	1.14%	Appointed	49,800,000	Liaoning Shengshi	Bao Lijun	Nil	Liaoning Huafeng
	Investment Co.,			director		Holdings			Investment Co.,
	Ltd. (遼寧華峰					Management			Ltd. (遼寧華峰
	投資有限公司)					Group Co., Ltd.			投資有限公司)
						(遼寧盛世控股管理
						集團有限公司)

82 Shengjing Bank Co., Ltd.

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

5.5 ISSUANCE OF DEBT SECURITIES

1. Debt Securities Issued

The Bank issued tier-two capital bonds of commercial banks in the aggregate of RMB10 billion in the national inter-bank bond market on 4 December 2015. The term of maturity of such bonds is 10 years. The interest rate is calculated per annum based on fixed interest rate. The coupon rate is interest-bearing fixed rate of 4.57%. Interest on such bonds shall be paid once per year. Upon approval by the CBIRC, the Bank could choose to redeem the current bond in a lump sum at a whole or at a portion per the face value on the last day of the fifth interest calculating year for such bonds.

The Bank issued Tier-two Capital bonds of commercial banks in the aggregate of RMB6 billion in the national inter-bank bond market on 18 December 2017. The term of maturity of such bonds is 10 years. The interest rate is calculated per annum based on fixed interest rate. The coupon rate is interest-bearing fixed rate of 4.90%. Interest on such bonds shall be paid once per year. Upon approval by the CBIRC, the Bank could choose to redeem all or part of the current bond in a lump sum at the face value on the last day of the fifth interest calculating year for such bonds.

The Bank issued 2016 fixed rate financial bonds in the aggregate of RMB2 billion on 26 August 2016 with the term of maturity of 5 years and an annual coupon rate of 3.10%.

The Bank issued the first tranche of 2018 fixed-rate financial bonds in the aggregate of RMB12 billion on 15 August 2018 with the term of maturity of 3 years and an annual coupon rate of 4.35%.

The Bank issued the second tranche of 2018 fixed-rate financial bonds in the aggregate of RMB8 billion on 25 October 2018 with the term of maturity of 3 years and an annual coupon rate of 4.10%.

The Bank issued the third tranche of 2018 financial fixed-rate financial bonds in the aggregate of RMB6.9 billion on 26 November 2018 with the term of maturity of 3 years and an annual coupon rate of 3.98%.

Interim Report 2020

CHANGE IN SHARE CAPITAL AND SHAREHOLDERS (CONTINUED)

2. Proposed Issuance of Debt Securities

The Board has resolved, and the Shareholders have approved at the 2018 second extraordinary general meeting of the Bank held on 17 August 2018 that, subject to necessary governmental and regulatory authorities, the Bank will issue capital bonds with no fixed term in the aggregate principal amount of up to RMB9 billion to members of the interbank bond market in China. The bonds will have no fixed term, with the date of triggering event being the date of maturity; and the interest rate of the bonds will be determined with reference to the market interest rate. The investors will not be entitled to repurchase the bonds, and the Bank is entitled to redeem all or part of the bonds from the fifth year following the date of issuance. The proceeds from the issuance of the bonds, after deducting issuance expenses, will be used to replenish other Tier-one Capital.

The Board has resolved, and the Shareholders have approved at the 2019 annual general meeting of the Bank held on 5 June 2020 that, subject to necessary governmental and regulatory authorities, the Bank will issue financial bonds in the aggregate principal amount of up to RMB30 billion to members of the interbank bond market in China, of which, Tier- two Capital bonds shall not exceed RMB15 billion and other types of financial bonds shall not exceed RMB15 billion. The bonds will have a term of up to 10 years (inclusive) and the Tier-two Capital bonds will have a term of no less than 5 years. The interest rate of the bonds will be determined with reference to the market interest rate. The proceeds from the issuance of the bonds, after deducting issuance expenses, will be used to optimise the liability and capital structure, stabilized resources of medium and long-term funds and support the development of medium and long-term asset business; the proceeds from issuance of Tier-two Capital will be used to replenish the Bank's Tier-two Capital and improve capital adequacy to support the sustainable and stable development of its business.

The debt securities as mentioned above will not be listed on the Hong Kong Stock Exchange.

5.6 PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE BANK

During the Reporting Period, neither the Bank nor any of its subsidiaries purchased, redeemed or sold any of the Bank's listed securities.

84 Shengjing Bank Co., Ltd.

DIRECTORS, SUPERVISORS, SENIOR

MANAGEMENT AND EMPLOYEES

6.1 BASIC INFORMATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

As at 30 June 2020, the Directors, Supervisors and senior management of the Bank comprised:

Name	Age	Position
Mr. QIU Huofa (邱火發)	60	Executive Director, Chairperson of the
		Board
Mr. SHEN Guoyong (沈國勇)Note	49	Executive Director, President
Mr. WANG Yigong (王亦工)	54	Executive Director, Vice President
Mr. WU Gang (吳剛)	50	Executive Director, Vice President
Mr. ZHANG Qiyang (張啟陽)	55	Non-executive Director
Mr. LIU Yanxue (劉彥學)	54	Non-executive Director
Mr. LI Jianwei (李建偉)	60	Non-executive Director
Mr. LI Yuguo (李玉國)	66	Non-executive Director
Mr. YUEN Wing Shing (袁永誠 )	73	Non-executive Director
Mr. ZHAO Weiqing (趙偉卿)	60	Non-executive Director
Mr. NI Guoju (倪國巨)	66	Independent Non-executive Director
Mr. KEUNG Chak (姜策)	60	Independent Non-executive Director
Mr. TAI Kwok Leung, Alexander (戴國良)	62	Independent Non-executive Director
Mr. XING Tiancai (邢天才)	58	Independent Non-executive Director
Mr. LI Jinyi (李進一)	56	Independent Non-executive Director
Mr. YANG Liya (楊利亞)	57	Employee Supervisor, Chairman of the
		Board of Supervisors
Mr. SHI Yang (石陽)	55	Employee Supervisor
Mr. WANG Lijun (王立軍)	39	Employee Supervisor
Mr. PAN Wenge (潘文戈)	54	Shareholder Supervisor
Mr. LIU Huidi (劉惠弟)	59	Shareholder Supervisor
Mr. YU Haobo (于浩波)	55	Shareholder Supervisor
Mr. BA Junyu (巴俊宇)	65	External Supervisor
Mr. SUN Hang (孫航)	54	External Supervisor
Mr. DAI Qiang (戴強)	54	External Supervisor
Mr. SUN Yonghseng (孫永生)	60	Vice President
Mr. ZHANG Xuewen (張學文)	52	Vice President
Ms. ZHANG Jun (張珺)	49	Vice President
Ms. LI Ying(李穎女士)	52	Chief Risk Officer
Mr. ZHOU Zhi (周峙)	51	Secretary of the Board
Mr. BAO Hong(包宏先生)	48	Chief Information Officer
Ms. LI Zheng (歷崢女士)	34	Director of Human Resources

Note: The election of Mr. SHEN Guoyong as an executive Director will be proposed for approval by shareholders at the general meeting of the Bank. The qualification of Mr. SHEN Guoyong as an executive Director is subject to the official approval of the CBIRC Liaoning Bureau.

Interim Report 2020

DIRECTORS, SUPERVISORS, SENIOR

MANAGEMENT AND EMPLOYEES (CONTINUED)

As at 30 June 2020, to the knowledge of the Directors after making reasonable enquiries, the interests or short positions of the Directors, the Supervisors and the chief executives of the Bank and their respective associates in the shares, underlying Shares and debentures of the Bank or its associated corporations (within the meaning of Part XV of the SFO) which are required to be notified to the Bank and the Hong Kong Stock Exchange under the provisions of Divisions 7 and 8 of Part XV of the SFO, or as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Bank and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in Appendix 10 to the Listing Rules were set out as follows:

Domestic Shares

					Representing	Representing
					percentage	percentage
					with respect	with respect
			Domestic	to Domestic	to the total
	Positions held	Number of	Shares held	Shares of	share capital
Name	at the Bank	Nature of interests	of the Bank	the Bank	of the Bank
			(share)	(%)	(%)
		Interest of a controlled
LI Yuguo (李玉國)	Non-executive Director	corporation	400,000,000(1)	6.1958	4.5472
SHI Yang (石陽)	Employee Supervisor	Beneficial owner	107,684		0.0017	0.0012
		Interest of spouse	5,722		0.0001	0.0001
	Executive Director, Vice
WU Gang (吳剛)	President	Beneficial owner	146,149		0.0023	0.0017

Note:

Please see the report "CHANGE IN SHARE CAPITAL AND SHAREHOLDERS - INTERESTS AND SHORT POSITIONS OF THE SECURITIES AND FUTURE ORDINANCE (THE "SFO") OF HONG KONG" for details.

Save as disclosed above, none of the Directors, the Supervisors, or the chief executives and their respective associates held any interests or short positions in the shares, underlying shares and debentures of the Bank or its associated corporations as at 30 June 2020 which are required to be notified to the Bank and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Bank and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in Appendix 10 to the Listing Rules.

86 Shengjing Bank Co., Ltd.

DIRECTORS, SUPERVISORS, SENIOR

MANAGEMENT AND EMPLOYEES (CONTINUED)

6.2 CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Reference is made to the announcement of the Bank dated 17 January 2020. Mr. ZHANG Qiang has resigned from the positions of president, executive Director, vice Chairman of the risk control and consumers' rights protection committee of the Board, member of the strategic development committee of the Board with effect from 17 January 2020 due to change of work.

On the meeting of the Board of the Bank held on 17 January 2020, Mr. XIAO Ruiyan ("Mr. XIAO") has been elected as the candidate for an executive Director and appointed as the president of the Bank. Reference is made to the announcement of the Bank dated 29 May 2020. The qualification of Mr. XIAO as the president of the Bank has been approved by the CBIRC Liaoning Bureau with his term of office commencing from 27 May 2020. Reference is made to the announcement of the Bank dated 6 July 2020. Mr. XIAO has resigned from the position of the president of the Bank due to change of work with effect from 6 July 2020. The resolution regarding the proposed election of Mr. XIAO as an executive Director of the Bank will not be proposed to the general meeting of the Bank for consideration.

Mr. LI Xin has resigned from the position of the vice president of the Bank since February 2020.

Ms. ZHANG Jun has been appointed as the vice president of the Bank at the meeting of the Board dated 27 March 2020. The qualification of Ms. ZHANG Jun to serve as the vice president of the Bank was approved by the CBIRC Liaoning Bureau on 19 August 2020, with her term of office commencing from 19 August 2020.

Interim Report 2020

DIRECTORS, SUPERVISORS, SENIOR

MANAGEMENT AND EMPLOYEES (CONTINUED)

Ms. LI Ying has been appointed as the chief risk officer of the Bank at the meeting of the Board dated 27 March 2020. The qualification of Ms. LI to serve as the chief risk officer of the Bank has been approved by the CBIRC Liaoning Bureau on 3 July 2020, with her term of office commencing from 3 July 2020.

Mr. BAO Hong has been appointed as the chief financial officer of the Bank at the meeting of the Board dated 27 March 2020. The qualification of Mr. BAO to serve as the chief financial officer of the Bank has been approved by the CBIRC Liaoning Bureau on 3 July 2020, with his term of office commencing from 3 July 2020.

On the meeting of the Board of the Bank held on 6 July 2020, Mr. SHEN Guoyong has been elected as the candidate for an executive Director and appointed as the president of the Bank. The election of Mr. SHEN Guoyong as an executive Director will be proposed for approval by shareholders at the general meeting of the Bank. The qualification of Mr. SHEN Guoyong as an executive Director of the Bank is subject to official approval from the CBIRC Liaoning Bureau. The qualification of Mr. SHEN to serve as the President of the Bank was approved by the CBIRC Liaoning Bureau on 19 August 2020, with his term of office commencing from 19 August 2020.

During the Reporting Period, there was no change of Supervisors of the Bank.

6.3 SECURITIES TRANSACTIONS BY DIRECTORS AND SUPERVISORS

The Bank adopted the Rules for Securities Transactions by Directors, Supervisors and Key Employees of Shengjing Bank Co., Ltd. (the "Rules for Securities Transactions") regarding securities transactions by Directors, Supervisors and certain key employees on terms not less exacting than the required standard in the "Model Code for Securities Transactions by Directors of Listed Issuers" as set out in Appendix 10 to the Listing Rules.

Having made specific enquiries to all Directors and Supervisors, each of the Directors and Supervisors of the Bank has confirmed that they complied with the Rules for Securities Transactions during the Reporting Period.

88 Shengjing Bank Co., Ltd.

DIRECTORS, SUPERVISORS, SENIOR

MANAGEMENT AND EMPLOYEES (CONTINUED)

6.4 EMPLOYEES, EMPLOYEES' COMPENSATION POLICIES AND TRAINING SCHEMES

As at 30 June 2020, the Bank had a total of 6,307 employees.

The Bank has established a compensation management system that is on basis of performance assessment and consistent with sustainable development of the Bank. Employee compensation consists of fixed salary, variable salary, and welfare income. It is determined by employee ability and results of performance assessment, which gives full play to the incentive and bounding functions of compensation and takes into account external competitiveness and internal equity. The Bank contributes to its employees' social insurance and provides housing funds company pension, supplementary medical insurance and other employee benefit in accordance with the provisions of PRC laws, rules and regulations.

According to its overall development strategies and training plans, aiming at guiding employees to realize vocational value and improving position contribution level, the Bank has organized level-based and category-based training sessions by focusing its training contents to enhancing the awareness of compliance management, risk control, marketing and practical operation and promoting capability, dedicating to allocation and utilization of human resources in the whole Bank and associating the core operation work for the year. In the first half of 2020, the Bank has conducted a total of 39,732 person times training sessions.

Interim Report 2020

SIGNIFICANT EVENTS

7.1 CORPORATE GOVERNANCE CODE

The Bank strives to improve the transparency and accountability of corporate governance and ensure high standards of corporate governance to safeguard shareholders' interests and enhance its enterprise value and commitment.

During the Reporting Period, the Bank complied with the code provisions in the Corporate Governance Code (the "Code") set out in Appendix 14 to the Listing Rules and the Listing Rules governing disclosure of insider information.

7.2 EARNINGS AND DIVIDENDS

The Bank's revenue for the six months ended 30 June 2020 and the Bank's financial position as at the same date are set out in the section headed "Interim Financial Statements".

Upon consideration and approval at the Bank's 2019 annual general meeting held on 5 June 2020, the Bank decided not to distribute any cash dividend or bonus shares, nor convert any capital reserve into share capital.

The Bank will not distribute any interim dividend for the first six months of 2020 or convert any capital reserve into share capital.

7.3 RELATED PARTY TRANSACTIONS

No material related party transaction that has adverse impact on the Bank's business results and financial position occurred during the Reporting Period.

7.4 MATERIAL LITIGATION AND ARBITRATION

During the Reporting Period, the Bank was not involved in any litigation or arbitration that would materially affect its business operations.

90 Shengjing Bank Co., Ltd.

SIGNIFICANT EVENTS (CONTINUED)

7.5 PLEDGE OF ASSETS

Details of the Bank's pledge of assets for the six months ended 30 June 2020 are set out in the financial statement.

7.6 PUNISHMENT ON THE BANK AND ITS DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

During the Reporting Period, none of the Bank, the Directors, the Supervisors or the senior management of the Bank was subject to any investigation, administrative penalty or public criticism by the CSRC or the CBIRC, or any public censure by any securities exchange, or any punishment by any other regulatory authorities which would have a material impact on the Bank's operations.

7.7 REPAYMENT OF THE RELEVANT RECEIVABLES BY SHENYANG HENGXIN

Reference is made to pages 164 to 165 of the prospectus of the Bank dated 15 December 2014 (the "Prospectus") in connection with the global offering of H Shares. As disclosed in the Prospectus, on 8 October 2014, Shenyang Hengxin undertook to the Bank that, among others, it will use the proceeds from disposing of the Shares it held to repay the outstanding balance of a loan in the amount of RMB1,723 million (such loan is classified as "Other Receivables" as the loan is interest-free) (the "Relevant Receivables") owed by Shenyang City Infrastructure Construction Investment Development Co., Ltd. (瀋陽市城市基礎設施建設投資發展有限公司) ("Shenyang City Construction") in full within two years from the date on which the H Shares first commenced trading on the Hong Kong Stock Exchange.

Reference is also made to (i) the circular of the Bank dated 5 August 2015 in relation to the proposed plan for the A Share Offering; and (ii) the announcements of the Bank dated 5 July 2015, 27 August 2015, 27 November 2015 and 30 November 2015 in relation to, among other things, the A Share Offering. As confirmed by the Bank's PRC legal advisers, pursuant to the relevant PRC laws and regulations as well as the regulatory requirements of the CSRC and the relevant stock exchange, Shenyang Hengxin, as a major holder of Domestic Shares, is not allowed to dispose of any Domestic Shares held by it before completion of the A Share Offering. In addition, the Domestic Shares held by Shenyang Hengxin will be subject to lock-up

Interim Report 2020

SIGNIFICANT EVENTS (CONTINUED)

for 36 months from completion of the A Share Offering (the "Lock-up Period"). After negotiation among the Bank, Shenyang City Construction and Shenyang Hengxin regarding repayment of the outstanding balance of the Relevant Receivables, on 11 November 2016, Shenyang Hengxin provided a supplemental undertaking to the Bank that: (i) Shenyang Hengxin will continue to perform its obligations (including using the proceeds from disposal of a portion of the Shares it held to repay the outstanding balance of the Relevant Receivables), and will repay the outstanding balance of the Relevant Receivables in full within 24 months from the expiry of the Lock-up Period; and (ii) without the Bank's written consent, Shenyang Hengxin will not dispose of any Shares it held, nor will it pledge or transfer any or all of such Shares or create any encumbrances on such Shares prior to the full repayment of the outstanding balance of the Relevant Receivables.

Reference is further made to (i) the announcement of the Bank dated 31 March 2017 in relation to the withdrawal of its A-share listing application; and (ii) the announcement of the Bank dated 13 April 2017 in relation to the repayment of the Relevant Receivables by Shenyang Hengxin. The Bank and Shenyang Hengxin have been proactively pushing forward the relevant work related to the repayment of the Relevant Receivables, including but not limited to, going through the relevant approval procedures in accordance with the applicable PRC laws and regulations, with a view to implement matters regarding the repayment of the Relevant Receivables.

As at the end of the Reporting Period, the balance of the Relevant Receivables was approximately RMB654 million, and the balance of the impairment provision was RMB273 million.

7.8 REVIEW OF THE INTERIM RESULTS REPORT

Financial statements disclosed herein have not been audited. The interim financial statements for the six months ended 30 June 2020 prepared by the Bank in accordance with the International Financial Reporting Standards promulgated by the International Accounting Standards Board have been reviewed by KPMG in accordance with Hong Kong Standard on Review Engagements 2410.

The Board and the Audit Committee of the Board have reviewed and approved the interim results report of the Bank.

7.9 PUBLICATION OF INTERIM RESULTS REPORT

This report is prepared in both English and Chinese versions. In the event of any discrepancies in interpretation between the English version and Chinese version, the Chinese version shall prevail.

92 Shengjing Bank Co., Ltd.

REVIEW REPORT OF THE INDEPENDENT AUDITORS

Review report to the board of directors of Shengjing Bank Co., Ltd.

(A joint stock company incorporated in the People's Republic of China with limited liability)

INTRODUCTION

We have reviewed the interim financial report set out on pages 95 to 229 which comprises the consolidated statement of financial position of Shengjing Bank Co., Ltd. (the "Bank") and its subsidiaries (collectively the "Group") as of 30 June 2020 and the related consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the six months then ended and explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of an interim financial report to be in compliance with the relevant provisions thereof and International Accounting Standard 34, Interim financial reporting , issued by the International Accounting Standards Board. The directors are responsible for the preparation and presentation of the interim financial report in accordance with International Accounting Standard 34.

Our responsibility is to form a conclusion, based on our review, on the interim financial report and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, Review of interim financial information performed by the independent auditor of the entity , issued by the Hong Kong Institute of Certified Public Accountants. A review of the interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.

Interim Report 2020

REVIEW REPORT OF THE INDEPENDENT AUDITORS (CONTINUED)

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim financial report as at 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim financial reporting .

Certified Public Accountants

8th Floor, Prince's Building

10 Chater Road

Central, Hong Kong

28 August 2020

94 Shengjing Bank Co., Ltd.

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2020 (Expressed in thousands of Renminbi ("RMB"), unless otherwise stated)

			Six months ended 30 June
	Note	2020		2019

Interest income		20,838,858		22,290,578
Interest expense		(13,355,516)	(15,418,393)

Net interest income	5	7,483,342		6,872,185
Fee and commission income		886,758		694,484
Fee and commission expense		(305,858)	(83,238)

Net fee and commission income	6	580,900		611,246
Net trading gains	7	2,935,347		1,302,617
Net gains arising from investments	8	2,335,148		2,933,500
Net foreign exchange losses		(3,638,101)	(1,589,387)
Other operating income	9	142,096		7,421

Operating income		9,838,732		10,137,582
Operating expenses	10	(2,212,683)	(2,011,047)
Impairment losses on assets	11	(4,372,912)	(4,596,742)

Profit before taxation		3,253,137		3,529,793
Income tax expense	12	(407,400)	(385,602)

Profit for the period		2,845,737		3,144,191
Net profit attributable to:


Equity shareholders of the Bank		2,829,393		3,156,059
Non-controlling interests		16,344		(11,868)

		2,845,737		3,144,191

The notes on pages 106 to 229 form part of this interim financial report.

Interim Report 2020

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (CONTINUED)

For the six months ended 30 June 2020

(Expressed in thousands of Renminbi ("RMB"), unless otherwise stated)

				Six months ended 30 June
	Note	2020		2019

Net profit		2,845,737		3,144,191
Other comprehensive income:
Items that will not be reclassified to profit or loss
- Remeasurement of net defined benefit liability		2		(7)
- Equity investments at fair value through other
comprehensive income - net movement in fair
value reserve (non-recycling)		(213,706)		-
Items that may be reclassified subsequently to
profit or loss
- Financial assets at fair value through other
comprehensive income:
- net movement in the fair value reserve		(856,418)	(714,706)
- net movement in the provision reserve		121,882		4,988

Other comprehensive income net of tax		(948,240)	(709,725)

Total comprehensive income		1,897,497		2,434,466
Total comprehensive income attributable to:


Equity shareholders of the Bank		1,881,153		2,446,334
Non-controlling interests		16,344		(11,868)

		1,897,497		2,434,466
Basic and diluted earnings per share (in RMB)

13	0.32		0.54

The notes on pages 106 to 229 form part of this interim financial report.

96 Shengjing Bank Co., Ltd.

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2020 (Expressed in thousands of RMB, unless otherwise stated)

			30 June		31 December
	Note	2020		2019

Assets
Cash and deposits with central bank	14	76,386,391	90,533,151
Deposits with banks and other financial institutions	15	11,272,658	21,104,213
Placements with banks and other financial
institutions	16	5,899,576	8,198,954
Derivative financial assets	17	7,012,163	3,379,675
Financial assets held under resale agreements	18	3,982,562	18,713,438
Loans and advances to customers	19	501,766,427	446,375,521
Financial investments:
Financial assets at fair value through profit or
loss	20(a)	160,602,564	156,691,876
Financial assets at fair value through other
comprehensive income	20(b)	45,330,431	33,451,350
Financial assets measured at amortised cost	20(c)	231,821,408	227,348,966
Property and equipment	21	5,835,630		5,702,278
Deferred tax assets	22	2,798,200		4,129,576
Other assets	23		5,681,274			5,851,798
Total assets		1,058,389,284	1,021,480,796

The notes on pages 106 to 229 form part of this interim financial report.

Interim Report 2020

UNAUDITED CONSOLIDATED STATEMENT OF

FINANCIAL POSITION (CONTINUED)

As at 30 June 2020

(Expressed in thousands of RMB, unless otherwise stated)

	30 June	31 December
Note	2020	2019

Liabilities
Borrowings from central bank	24	6,839,521		6,793,977
Deposits from banks and other financial institutions	25	101,930,677		96,837,332
Placements from banks and other financial
institutions	26	9,089,217	6,589,301
Financial liabilities at fair value through profit or
loss		25,078,940	26,520,878
Derivative financial liabilities	17	831,053	694,473
Financial assets sold under repurchase
agreements	27	90,607,636	60,117,133
Deposits from customers	28	655,559,388	655,070,994
Income tax payable			-	1,605,476
Debt securities issued	29	74,860,982	80,993,054
Other liabilities	30	12,572,388	7,136,193

Total liabilities		977,369,802		942,358,811

The notes on pages 106 to 229 form part of this interim financial report.

98 Shengjing Bank Co., Ltd.

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